TALLAHASSEE — A state law setting tax rates for cable and satellite television services in Florida was recently upheld by the state’s Supreme Court. 

The law, 202.12(1) in the Florida Statutes, is the Communications Services Tax (CST), which sets a tax rate of 6.8 percent for cable service and a higher 10.8 percent tax rate for satellite service. Satellite companies DIRECTV Inc. and Echostar LLC filed suit claiming that the law was unconstitutional under the federal Commerce Clause. 

Currently the tax rates are set at 4.92 percent for cable services, while satellite services are taxed at higher rate of 9.07 percent.

In their initial claim, the satellite companies sought a refund of the taxes that they had paid to the state. The initial trial court found the claims without merit. However, after the satellite companies appealed the decision and overturned the lower courts’ ruling. That left the defendants in the case, the Florida Department of Revenue (DOR) and Florida Cable Telecommunications Association Inc. (FCTA), with the to appeal the decision. The DOR et. al appealed to the Supreme Court alleging that the legislation in question, Florida State Statute 202.12(1) was not in violation of federal law and that no tax monies collected should be returned to the satellite providers.

Florida Supreme Court Justice Peggy A. Quince wrote the opinion, which was in agreement with the trial court on several points. Quince clarified the court opinion and ruled that in fact, the CST did not violate the Commerce Clause by favoring in-state business because both the cable and the satellite companies are out-of-state businesses.

“Cable is not a local, in-state interest any more than satellite,” Quince wrote. “While it may be true that cable employs more Florida residents and uses more local infrastructure to provide its services, the Supreme Court has never found a company to be an instate interest because it had a greater presence in a state.”

This isn’t the first time that satellite companies have challenged local legislation in court. The satellite companies have fought the legal battle before and suffered defeat in other states.

“To date, every state and federal court considering Commerce Clause challenges brought by the satellite industry arguing against state tax measures as favoring the cable industry has held that these taxes do not violate the dormant Commerce Clause,” wrote Justice Quince in the court’s opinion.

With no evidence before the court that the CST was enacted with the intent to discriminate against cable or satellite, the court also dismissed the claim made by the satellite companies that the law was intended to be unfair. This is the same argument that DIRECTV has put forward in other state courts, and likewise the same results.

The court found that because the legislation didn’t violate constitutional fairness standards, the 1st District Court of Appeal ruling that found the CST invalid was reversed. With the law remaining in effect, none of the tax money collected by the DOR will be returned to the satellite companies. Unless, of course, the case is appealed to the U.S. Supreme Court and a different result is achieved. Such an outcome is unlikely however, as DIRECTV has made similar attempts at litigating legislation unsuccessfully.

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Organizations in this Story

Florida Department of Revenue
5050 W Tennessee St
Tallahassee, FL - 32304-9411

Florida Supreme Court
500 South Duval Street
Tallahassee, FL - 32399

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