Supreme Court To Consider Whether To Hear Dish/DirecTV Taxation Complaints

The Supreme Court is to meet Oct. 30 to decide whether to take up a pair of related DirecTV/Dish Network legal fights on sales taxes on their services versus how cable subscribers are taxed. But whether the justices opt to add the linked cases to their 2015-2016 docket is difficult to say, legal scholars told us.

"I think there’s good reason for the Court to think about this issue (but dormant Commerce Clause) cases are idiosyncratic, and it’s just very difficult to predict the likelihood of a grant, short of a court doing something that’s both really wrong and likely to produce an enormous amount of mischief in the market," William Araiza, vice dean at Brooklyn Law School and one of a group of law professors who signed an amicus brief in the case, emailed us. "I’m not sure this case satisfies the latter, given how easy it would be for lower courts to distinguish it away."

The twin cases originally were circulated for the Sept. 28 conference, at which justices decide on what cases they will hear oral argument and issue decisions, but just days before that it was relisted for Oct. 30. "If I were the litigant, I'd say that's hopeful, but I certainly wouldn't bet much on it," Loftus Becker, a law professor at University of Connecticut and also an amicus signer, told us. The Supreme Court has started making a habit in recent months of granting certiorari to cases that have been relisted, Becker said. But such relisting might indicate the justices are thinking of taking up such a case, or in the Dish/DirecTV situation it might reflect that Massachusetts, a defendant, didn't file a response until just days before the Sept. 28 conference, so more time was needed, Becker said. The court denied certiorari earlier this year to another case raising similar legal issues, he said.

DirecTV and Dish sued Tennessee Commissioner of Revenue Richard Roberts and the Massachusetts Department of Revenue over those states' tax structures -- Tennessee in 2003 over its pay-TV sales tax regime, which gives cable subscribers a tax exemption on the first $15 of their bills but no such break to satellite-TV subscribers, and Massachusetts seven years later after the state enacted a satellite-only excise tax. Both Massachusetts and Tennessee appellate courts shot down Dish and DirecTV arguments in large part on the grounds the companies are regulated differently from cable. The Tennessee Supreme Court declined to review the case. The Massachusetts Supreme Judicial Court sided with the state.

Lower courts "are hopelessly split" on determining how businesses are similarly situated, Dish and DirecTV said in their Supreme Court petition for the Massachusetts case, pointing to various circuit court and state high court decisions that treat businesses as similarly situated if they compete in relevant markets, and at other circuit court decisions -- along with the Massachusetts Supreme Judicial Court ruling -- that have said competition isn't sufficient and the determination also should include such issues as methods of operation and regulatory responsibilities. "Only this Court can resolve these squarely conflicting approaches," the satellite companies said. "This persistent confusion is contrary to the very purpose of the dormant Commerce Clause, which is to ensure national commercial markets." The issue has long been a gray area of law, and the Dish/DirecTV complaints appear to be a good case for clarifying some issues, Becker said.

Claiming its members have also been "encumbered by protectionist regulatory or tax burdens," the National Association of Wine Retailers in an amicus brief urged the court to take up the Tennessee case because the Dish/DirecTV petitions "raise an important, recurring question that has wide applicability not only to the markets for pay-TV services in Massachusetts and Tennessee, but also to other markets across the nation." And the law professors said in their Massachusetts case brief that the Tennessee and Massachusetts decisions "cannot be squared with the Court’s existing dormant Commerce Clause anti-discrimination framework and contribute to growing confusion among the lower courts as to the appropriate mode of dormant Commerce Clause analysis -- in particular, what it means to be 'similarly situated' for dormant Commerce Clause purposes."

The satellite companies also have sued Kentucky, North Carolina and Ohio over tax regimes that treated satellite and cable differently, claiming dormant Commerce Clause issues, and in each case lost as courts in those states found the tax issues had nothing to do with geographic location of the businesses and thus weren't an interstate commerce matter, Massachusetts said in its response. Echoed Roberts in his response, "virtually every court that has considered petitioners’ claim has held that different tax treatment of cable operators and satellite providers does not violate the dormant Commerce Clause." The state also argued that there's no division among courts over whether just the fact of being competitors is a test for being similarly situated: "This Court has never suggested that the inquiry must be limited to whether entities are competitors, nor has any lower court adopted such a rule."