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DBS Seeks State Tax Help From Congress

Washington – DirecTV and EchoStar are urging Congress to pass a law that would bar states from applying sales taxes to satellite-TV providers but not to cable system operators, according to cable and satellite lobbyists.

The two satellite companies, serving about 30 million customers combined, are trying to insert the tax provision in legislation designed to make permanent the taxation ban on the retail price of broadband access service.

About six states have sale taxes that DirecTV and EchoStar view as discriminatory because cable operators are exempt. But the two satellite TV companies have lost at least twice in federal court to get the taxes struck down.

The cable industry is opposing the satellite giants on Capitol Hill. Cable claims that the imposition of a satellite TV sales tax on cable would be discriminatory because cable system already surrender 5% of their cable service revenue to local governments to compensate them for use of public rights of way.

EchoStar and DirecTV insist that the 5% franchise fee paid by cable companies isn’t a tax per se but rent to occupy government-owned property.

“Cable companies receive something of enormous value in return for paying the franchise fee -- access to rights-of-way that they value in the billions of dollars in their (Securities and Exchange Commission) filings. DBS providers obtain no such valuable rights when they pay a sale taxes,” DirecTV and EchoStar said in a recent memo for House Judiciary Committee staff.

Cable also argues that applying the sales tax to both cable and DBS or lifting the sales tax on DBS where it exists today would discriminate against cable because in either instance cable would pay more in government-imposed taxes and fees than DBS.