COLUMBUS, Ohio — The Ohio Supreme Court has upheld a state sales tax for satellite TV providers that cable competitors don’t have to pay, rejecting arguments from the satellite industry that the tax is unfair and unconstitutional.
In the 5-2 decision released Monday, the state’s highest court ruled that the 2003 tax does not violate the U.S. Constitution’s Commerce Clause because the tax is based on differences between the nature of the businesses and does not favor in-state interests at the expense of out-of-state interests.
Satellite companies had argued that subjecting them and not their cable competitors to the tax violates their rights to interstate commerce, because their companies operate between states while cable companies operate within them.
But writing for the majority, Justice Terrence O’Donnell wrote that that justices concluded that Ohio lawmakers “imposed a sales tax that makes no distinction between local and interstate commerce, but rather distinguishes based on the mode of distributing television programming.”
Ohio has collected about $44 million a year since imposing the 5.5 percent sales tax on satellite TV as part of a budget-balancing tax package in 2003. The Legislature chose not to apply the tax to cable operators, which pay local franchise fees that range from 2 percent to 5 percent.
The lawsuit that reached the state Supreme Court was brought by DirecTV Inc. and EchoStar Satellite Corp., and the decision affirms an earlier ruling from a state appeals court. The satellite industry has challenged similar tax discrepancies in several other states, and attorneys said earlier that an Ohio high court ruling either way would likely be appealed to the U.S. Supreme Court.
There was no immediate reaction Monday from either the satellite industry or Ohio officials who had defended the tax.
In a dissent joined by Justice Paul Pfeifer, outgoing Chief Justice said flatly that the sales tax was indeed unconstitutional.
“It treats sellers of the same service differently. That’s discrimination,” Brown wrote.