Satellite, Cable Spar Over Video Tax Fairness Act

Satellite-TV Operator Says It Shouldn’t Have to Pay Same Taxes as Cable Operators Because It Uses No Infrastructure

The House Judiciary Committee heard testimony Thursday about whether or not satellite subscribers should have to pay a tax not charged to cable subscribers.

DirecTV executive vice president Mike Palkovic was on the Hill making his company's pitch for the so-called State Video Tax Fairness Act of 2007 (HR 3679), which he said would close that "loophole."

Palkovic told members of the House Judiciary Committee that it was unfair for states to try to charge satellite services a tax for something they don't use. While cable operators pay franchise fees -- which, he added, were different from taxes -- for tearing up streets and hanging wires, satellite operators take no toll on local facilities and shouldn't be charged a toll for delivering their services there.

He pointed out that Congress did not require satellite operators to pay franchise fees because, unlike cable, their service does not require use of public rights of way or physical facilities. Palkovic added that that states that do tax satellite services are simply doing an end-run around congressional intent to collect the same money from satellite as they do from cable.

Howard Symons, representing the National Cable & Telecommunications Association, said the group strongly opposed the bill. He said DirecTV's argument that franchise fees do no more than pay for rights of way was wrong, that franchise fees go to general operating funds and that cable usually pays separately for repairs.

Symons said franchise fees are more like a tax than a fee, and should not be considered a form of rent.

He said that satellite operators were just trying to get Congress to subsititute its judgment for localities when they should, instead, be the final arbiters of "tax parity."

Kristina Rasmussen, director of government affiars for the National Taxpayers Union, supports the bill, saying that if it passes it will get the group's "pro-taxpayer" seal of approval in its annual review of Congress.

The bill says, "No state shall impose a discriminatory tax on any means of providing multichannel-video-programming-distribution services, including Internet protocol (or any successor protocol), direct-broadcast satellite delivery and cable-television services," and it defines "discriminatory tax" as "any form of direct or indirect tax that results in different net state charges being imposed on substantially equivalent multichannel-video-programming services based on the means by which those services are delivered."