Bill Would Cap States’ Multichannel Taxes

Bill Would Cap States’ Multichannel Taxes
June 24, 2011

Legislators in the U.S. House of Representatives have introduced a bill that would prohibit states from imposing taxes on any multichannel television providers that exceed the tax rates paid by companies offering similar services but employing different technologies.

Introduced by Rep. James Sensenbrenner (R-WI) this past May, the State Video Fairness Act of 2011 defines a “tax as discriminatory if the net tax imposed on one means of providing multichannel video service is higher than the net tax rate imposed on another.”

Although praised by dish satellite networks, the bill prompted an outcry from cable companies that currently pay far higher state sales taxes in addition to fees for pole attachments, easement right-of-ways, and local franchising licenses than satellite companies.

Most cable providers pay 5 percent local franchise fees, a tax from which direct satellite (DBS) companies received an exemption as a provision in the 1996 Telecommunications Act because DBS system don’t use public rights-of-way. Additionally, a wide disparity exists in state sales taxes paid by terrestrial and satellite providers. In California, for example, cable companies pay up to 17.34 percent in state taxes, while DBS pays nothing.g – prompting concerns states will equalize DBS and cable taxes without localities rescinding franchise fees.

Localities use franchise fees as a way of taxing their citizens in a non-transparent way, just as they do with telephone and electric bills, said Carl Gipson, director of technology and telecommunications at the Washington Policy Center.

Gipson says reining in discriminatory taxes on multichannel video services is a good idea, but he maintains the bill falls short of this goal because states could still increase taxes on DBS to attain parity with those paid by cable companies.

“My only concern is that taxes would be raised in order to create the level playing field that policymakers so often talk about. I would rather see a broader base, which would result in a lower overall rate as well as remain revenue-neutral,” Gipson said.

Alyssa Carducci (ad.carducci@gmail.com) writes from Tampa, Florida.

Internet Info:

“The State Video Fairness Act of 2011,” Rep. James Sensenbrenner, May 10, 2011: http://www.govtrack.us/congress/billtext.xpd?bill=h112-1804