DIRECTV, Inc. v. Levin, 128 Ohio St. 3d 68

Background

Ohio imposes a 5.5% sales tax on satellite broadcasting services but not on cable broadcasting services.
R.C. 5739.01(B)(3)(p) defines sale to include satellite broadcasting service, but not cable service, due to the phrase 'without the use of ground receiving or distribution equipment.'
Satellite providers deliver programming via uplinks to satellites and down to subscribers' home dishes; cable providers use ground-based headends and local infrastructure.
Satellite companies filed suit arguing the differential tax favors in-state interests and burdens interstate commerce in violation of the Dormant Commerce Clause.
Trial court held the tax unconstitutional on discriminatory effects; the court of appeals reversed, concluding no Dormant Commerce Clause violation because tax treatment distinguished by business type, not by location.
The Ohio Supreme Court granted discretionary review to determine whether the differential tax on satellite versus cable services violates the Commerce Clause.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the differential tax on satellite vs. cable services violate the Dormant Commerce Clause?	DIRECTV argues the tax favors in-state cable interests by targeting the mode of delivery (ground vs. satellite).	Levin contends the differential rests on differences in business models, not location, and is permissible.	No Dormant Commerce Clause violation; tax based on mode of distribution, not location.
Are lobbyist statements about the tax admissible to prove discriminatory intent?	Statements could show discriminatory purpose behind the tax.	Intent is not clear from preserved record; admissibility questionable.	Lodging admissibility not reached; intentional-discrimination claim not preserved for review.
Can the tax be sustained under a compensatory-tax defense balancing franchise fees?	Differential tax is a protectionist device without adequate nondiscriminatory justification.	Franchise fees offset by the compensatory tax defense; tax serves as counterbalance to franchise fees.	Compensatory-tax defense does not save the tax; tax discriminates and is impermissible.

Key Cases Cited

Exxon Corp. v. Gov. of Maryland, 437 U.S. 117 (U.S. Supreme Court 1978) (no protection for unfavorable structure in retail markets; interstate commerce protection prioritizes market over firm)
Amerada Hess Corp. v. Dir., Div. of Taxation, New Jersey Dept. of Treasury, 490 U.S. 66 (U.S. Supreme Court 1989) (differential treatment based on business nature not location generally permissible)
Granholm v. Heald, 544 U.S. 460 (U.S. Supreme Court 2005) (direct-to-consumer restrictions barred when favoring local over out-of-state interests)
Armco Inc. v. Hardesty, 467 U.S. 638 (U.S. Supreme Court 1984) (local production tax structure invalid when used to shield in-state industries)
Boston Stock Exchange v. New York State Tax Comm., 429 U.S. 318 (U.S. Supreme Court 1977) (dormant Commerce Clause limits discriminatory taxes favoring local enterprises)
Oregon Waste Sys., Inc. v. Department of Environmental Quality, 511 U.S. 93 (U.S. Supreme Court 1994) (permissible to challenge discriminatory taxes that burden interstate commerce)
United Haulers Assn., Inc. v. Oneida-Herkimer Solid Waste Mgt. Auth., 550 U.S. 330 (U.S. Supreme Court 2007) (negative implication of Commerce Clause restrains state authority)
C & A Carbone, Inc. v. Clarkstown, 511 U.S. 383 (U.S. Supreme Court 1994) (per se invalid when discriminating against interstate commerce to protect local business)
Fulton Corp. v. Faulkner, 516 U.S. 325 (U.S. Supreme Court 1996) (protective discrimination invalid unless nondiscriminatory alternatives exist)
Philadelpah v. New Jersey, 437 U.S. 617 (U.S. Supreme Court 1978) (economic protectionism against interstate commerce not allowed)