Justices OK Ark. tax on cable TV Ruling may affect costs nationwide

April 17, 1991|By Lyle Denniston | Lyle Denniston,Washington Bureau of The Sun

WASHINGTON -- The Supreme Court, in a ruling that potentially could add to the rising costs of cable television service, ruled yesterday that states have the constitutional power to require cable TV to pay taxes that other parts of the media do not have to pay.

The cable industry, already under federal investigation over sharply rising rates charged to customers in recent years, indicated that any taxes imposed on cable operators will simply be passed on to customers.

Carol Vernon, speaking for the National Cable Television Association, said that "everyone should understand" that the ruling upholding an Arkansas gross receipts tax on cable TV operators would have a direct impact on consumers. "This is a tax on Arkansas cable subscribers," she said.

The industry fears that other states will pass similar levies against cable operators.

The Arkansas tax that withstood the industry's constitutional challenge yesterday exempts other media -- newspapers, magazines and regular "over-the-air" radio and television broadcasts.

The Supreme Court had ruled in the past that states may not single out a part of the media industry for special taxation, because that power can be abused as a form of censorship. In the new decision, which came on a 7-2 vote, it ruled that a tax that is applied in general to taxpayers but leaves out some media while covering others is invalid only if it has the actual effect of stifling the taxed medium's rights to free expression.

The industry's trade association noted that about half the states impose taxes on the cost of cable service and on equipment rental.

Justice Sandra Day O'Connor, who wrote the new ruling, declared: "Inherent in the power to tax is the power to discriminate in taxation."

When it comes to taxation of the media, her opinion added, the First Amendment is not violated "unless the tax is directed at, or presents the danger of suppressing, particular ideas."

There was no indication, she wrote, that the Arkansas legislature imposed its general gross receipts tax on cable TV companies in order to censor "the expressive activities of cable television . . . [It] has chosen simply to exclude or exempt certain media from a generally applicable tax."

Justice Thurgood Marshall, in a dissenting opinion supported by Justice Harry A. Blackmun, said that the Constitution should make clear that "government simply has no business interfering with the process by which citizens' preferences for information formats evolve."

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