Florida Department of Revenue v. DirecTV, Inc., etc.
215 So. 3d 46
| Fla. | 2017Background
- In 2001 Florida enacted the Communications Services Tax (CST) with different rates for cable (6.8% originally; 4.92% in 2015) and direct-to-home satellite service (10.8% originally; 9.07% in 2015).
- DIRECTV and Echostar sued seeking a declaration that the CST sales-tax provision (section 202.12(1)) violated the dormant Commerce Clause, injunctive relief, and tax refunds.
- The trial court granted summary judgment for the Department of Revenue, finding no Commerce Clause violation.
- The First District reversed, holding the CST had a discriminatory effect because it favored communications using local infrastructure (cable) over satellite and treated cable as an in‑state interest; it did not find discriminatory purpose.
- The Florida Supreme Court granted review, framed the dispute under the dormant Commerce Clause (discrimination inquiry), and reviewed de novo, presuming statutes constitutional unless invalid beyond reasonable doubt.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the CST discriminates in effect against interstate commerce | Satellite: CST imposes higher tax on satellite than cable, disadvantaging out‑of‑state satellite providers who compete with cable | State: Cable and satellite are not similarly situated and cable is not an in‑state interest, so no discriminatory effect | No discriminatory effect; cable and satellite are similarly situated but cable is not an in‑state interest, so effect claim fails |
| Whether cable and satellite are "substantially similar" entities for Dormant Commerce Clause analysis | Satellite: They compete in the same pay‑TV market and are economic substitutes | State: Different technologies, services, and regulatory regimes mean they are not similarly situated | Court: They are substantially similar for market competition purposes (both provide TV service and are substitutes) |
| Whether cable constitutes an in‑state interest (i.e., favored local business) | Satellite: Cable uses more local infrastructure and employs more Floridians, functioning as an in‑state interest favored by the tax | State: Both cable and satellite have interstate operations and out‑of‑state headquarters; neither is a local, in‑state business | Court: Cable is not an in‑state interest; both industries are interstate in nature, so no local‑favoring discrimination |
| Whether the CST was enacted with a discriminatory purpose | Satellite: Lobbyist/legislator affidavits show intent to favor cable and resist satellite market share | State: Text and official legislative history show neutral, tax‑simplification intent; outside statements not probative | Court: No discriminatory purpose shown; statutory text and official legislative materials reflect neutral, uniform intent |
Key Cases Cited
- Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) (four‑prong test for state tax validity under the dormant Commerce Clause)
- Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S. 93 (1994) (discriminatory effect requires disproportionate burdens on out‑of‑state interests)
- Gen. Motors Corp. v. Tracy, 519 U.S. 278 (1997) (entities must be substantially similar for discrimination analysis)
- Amerada Hess Corp. v. Dir., Div. of Taxation, 490 U.S. 66 (1989) (state may treat different business models differently if distinctions are based on business nature, not location)
- Hunt v. Wash. State Apple Advertising Comm’n, 432 U.S. 333 (1977) (discriminatory purpose standard and consideration of legislative history)
- Okla. Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175 (1995) (dormant Commerce Clause can invalidate state taxation absent Congressional action)
- United States v. Salerno, 481 U.S. 739 (1987) (facial challenges are difficult; challenger must show no set of circumstances where statute is valid)