Tennessee Court Of Appeals Rejects Dormant Commerce Clause Challenge To Cable Exemption In DIRECTV, Inc. v. Roberts

The Tennessee Court of Appeals held on February 27, 2015, that the Tennessee Cable Exemption, which exempts the first $15 of cable television service from sales tax, does not violate the Commerce Clause of the United States Constitution. This ruling reverses the trial court's decision, which had concluded that the exemption was unconstitutional.

This issue involving sales tax exemptions for cable services has been litigated in numerous jurisdictions across the United States, including Ohio, North Carolina, and, most recently, Massachusetts. The courts in these jurisdictions universally have rejected the satellite industries' challenges and upheld the cable exemptions.

The Court of Appeals reversed the trial court, concluding that cable companies and satellite companies are not "substantially similar entities" for Commerce Clause purposes. In reaching this conclusion, the court emphasized the significant differences in federal regulatory treatment between cable and satellite companies. Although the court addressed the decisions by other jurisdictions, the ruling was based on its independent analysis of the applicable law.

The court rejected the discriminatory effect and discriminatory purpose arguments made by DIRECTV and DISH and remanded the case to the trial court for further proceedings.

This decision is a significant victory for the cable industry in that it continues the increasing national trend of courts rejecting the satellite industry's attacks...