TELEVISION;

You asked if any states impose gross earnings taxes on companies providing direct broadcast satellite (DBS) television services and, if any do, whether the tax is passed through to customers.

Three states, Florida, New Mexico, and North Carolina, impose gross earnings taxes on DBS services, according to computer searches of state tax laws and administrative rulings. The tax rate is 5% in New Mexico and North Carolina. In Florida, the tax is 13. 17%, of which 2. 37% is a gross earnings tax and the remaining 10. 8% applies to the sales price of the service. It appears the tax is passed through to DBS subscribers in all three states since none of their laws prohibits the practice.

Florida’s DBS tax was adopted in 2000 as part of a larger overhaul of state and local telecommunication taxes. The new tax took effect on October 1, 2001 (Fla. Stats. , § 202. 12(1)(3)). Before the changes, DBS subscribers were exempt from the state telecommunication tax. According to news articles from the St. Petersburg Times and Miami Herald (copies enclosed), legislators attempted to repeal the new tax after constituents objected to increases in their monthly charges.

North Carolina’s 5% gross receipts tax on DBS service companies became effective January 1, 2002 (N. C. Gen. Stats. , § 105-164. 3, 105-164. 4, 105-164. 6). It applies to gross receipts derived from providing direct-to-home satellite services to North Carolina subscribers (NC Department of Revenue Bulletin 20-1. )

New Mexico has state and local gross receipts taxes instead of sales taxes. Its state gross receipts tax on DBS companies is 5%. No local tax applies, according to a November 15, 2001 regulation issued by the New Mexico Taxation and Revenue Department (copy enclosed), because the federal Telecommunications Act of 1996 preempted local gross receipts taxes on DBS providers. A department brochure states that it is a common practice for New Mexico businesses to pass the gross receipts tax through to consumers in their prices.

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