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Utah Nixes Cable Tax

The Utah State Tax Commission has rejected a request by Qwest Communications International to tax cable operators in the state like incumbent telephone providers: on a statewide basis rather than franchise by franchise.

The regulators, who issued their final written order Oct. 13, noted that as telephone and video convergence continues, taxation should be revised. But that matter should be taken up by the legislature, the order noted.

Qwest turned to the tax commissioners after it the Utah Legislature failed to pass a bill addressing the tax issue during its 2007 session. Qwest petitioned the tax regulators in June, stating that because cable providers — including Comcast, the state's largest — now offer telephony, they fall under the commission's regulation and should be subject to state taxation.

Rule 62, cited by Qwest, said that commission regulates assessment of “all property which operates as a unit across county lines.” Because Comcast is now a telephony provider, operating across not only county but state lines, it should be taxed by the state agency, the telco argued.

Comcast countered that only 2% of its tangible personal property is used to deliver voice-over-Internet-protocol services. Its main business continues to be video delivery, which is regulated at the local level, the operator wrote to the commission. A state levy would result in double taxation, the operator argued.

State taxation of cable telephony providers was also opposed by two prominent legislators, Sen. Curtis Bramble (R-Provo), the Utah Senate majority leader; and Sen. Wayne Niederhauser (R-Salt Lake County), the chair of the Senate revenue and taxation committee. Both urged the tax commission to leave the issue to elected leaders.

The commission disagreed with opponents who complained state taxation would raise taxes for cable operators. The commission is only interested in a valuation assignment that is fair, the commission wrote, adding that state-level taxation would not result in double taxation.

The commission expressed the belief that cable operators could eventually be taxed “at some point” by the state for their telephone property. The commission did not state what that tipping point would be, however.