Tax Parity for Video Providers

Today’s video marketplace is intensely competitive. More than 30 million consumers, representing about a third of the market, subscribe to a video provider other than cable. Yet in 44 states and the District of Columbia, cable customers pay more in state and local taxes and fees than do subscribers to cable’s greatest competitor, Direct Broadcast Satellite (DBS) service. To erase this inequity, some states have tried to ensure that all multichannel video providers operate on a level playing field.

Right now, DBS enjoys preferential tax treatment, as it is not responsible for the local taxes and fees – called franchise fees – that cable operators must pay. Almost all states impose higher taxes and fees on cable than on DBS, creating essentially a tax break for DBS that is no longer needed in our fully competitive marketplace. DirecTV and Dish Network are now the second and third largest video distributors in the United States with more than 30 million subscribers – large companies that do not need special advantages over their cable, phone, and wireless competitors.

Currently, there is legislation moving through Congress that would prevent states from ensuring tax parity. However, this legislation would also likely increase fees for cable customers in states where tax parity laws already exist and prevent other states from passing such laws.

Congress should support the rights of states to create a level playing field among competitive industries, and reject attempts to raise cable’s state sales taxes and the price of cable service.