DBS cos. seek to ax sat-TV tax

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EchoStar Communications Corp. and DirecTV Inc. have taken the first step
toward a court fight to eliminate a 5% sales tax levied on North Carolina’s
700,000 direct-broadcast satellite customers.

North Carolina law first requires the companies to seek a refund of taxes
paid, which totaled $30 million as of Jan. 1, 2002.

The tax is discriminatory, the companies argued, because it does not apply to
cable. If the North Carolina Department of Revenue does not refund the taxes
within 90 days, the companies said, they plan to file a lawsuit alleging
violation of the U.S. Constitution’s Commerce Clause, which prohibits state
taxes that discriminate against interstate commerce or are not related to
services provided to the taxpayer.

"These taxes discriminate in favor of the DBS companies’ chief competitors,
the dominant cable operators," said Michael Palkovic, chief financial officer at
DirecTV.

Monday’s action comes on the heels of the companies’ lawsuit against a 6%
sales tax enacted by the state of Ohio June 26.

Ed Kozelek, executive vice president of the Ohio Cable Telecommunications
Association, predicted that Ohio’s DBS levy would be found constitutional and
justifiable.

"Perhaps if the satellite lobby had spent less time criticizing the cable
industry and more time engaged in persuading policymakers why they should
continue to be allowed to extract billions of dollars from Ohio without giving
anything back," Kozelek said, "the outcome would have been different."

The DBS companies are fighting similar taxes in other states, as
well.

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