[Cite as DIRECTV, Inc. v. Levin, 128 Ohio St.3d 68, 2010-Ohio-6279.] 

DIRECTV, INC. ET AL., APPELLANTS, v. LEVIN, TAX COMMR., APPELLEE. 

[Cite as DIRECTV, Inc. v. Levin, 128 Ohio St.3d 68, 2010-Ohio-6279.] 

Taxation — Sales tax — R.C. 5739.01(B)(3)(p) — Satellite-broadcasting services 

— Taxation of sales of satellite-broadcasting services but not of cablebroadcasting services does not violate Commerce Clause of United States 

Constitution — Differential tax treatment of two categories of companies 

is constitutional when difference results solely from nature of business and 

not from location of companies’ activities.

(No. 2009-0627 — Submitted October 13, 2010 — Decided December 27, 2010.) 

APPEAL from the Court of Appeals for Franklin County, No. 08AP-32, 

181 Ohio App.3d 92, 2009-Ohio-636. 

___________________ 

SYLLABUS OF THE COURT

1. The Commerce Clause of the United States Constitution protects the interstate 

market, not particular interstate firms or particular structures or methods 

of operation in a retail market. (Exxon Corp. v. Gov. of Maryland (1978), 

437 U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91, followed.) 

2. The imposition of a sales tax by the Ohio General Assembly on satellite 

broadcasting services but not on cable broadcasting services does not 

violate the Commerce Clause of the United States Constitution, because 

the tax is based on differences between the nature of those businesses, not 

the location of their activities, and it does not favor in-state interests at the 

expense of out-of-state interests. (Kentucky Dept. of Revenue v. Davis

(2008), 553 U.S. 328, 128 S.Ct. 1801, 170 L.Ed.2d 685; Amerada Hess 

Corp. v. Dir., Div. of Taxation, New Jersey Dept. of Treasury (1989), 490 
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2 

U.S. 66, 109 S.Ct. 1617, 104 L.Ed.2d 58; and DIRECTV, Inc. v. Treesh

(C.A.6, 2007), 487 F.3d 471, followed.) 

__________________ 

O’DONNELL, J. 

{¶ 1} DIRECTV, Inc., and EchoStar Satellite, L.L.C. (“the satellite 

companies”) appeal from a decision of the Tenth District Court of Appeals and 

ask us to consider whether the imposition of a sales tax on the retail sale of 

satellite broadcasting services without also imposing the same tax on cable 

broadcasting services violates the Commerce Clause of the United States 

Constitution. As other jurisdictions that have considered this same issue have 

done, we conclude that the Commerce Clause protects the interstate market, not 

particular interstate firms or particular structures or methods of operation in a 

retail market. The imposition of a sales tax by the Ohio General Assembly on 

satellite broadcasting services but not on cable broadcasting services does not 

violate the Commerce Clause of the United States Constitution, because the tax is 

based on differences between the nature of those businesses, not the location of 

their activities, and it does not favor in-state interests at the expense of out-ofstate interests. Accordingly, the judgment of the court of appeals is affirmed.

Factual History 

Satellite and Cable Broadcasting Services 

{¶ 2} The satellite companies provide pay-television programming 

services to consumers in Ohio and other states using satellites in fixed orbits 

above the earth. The satellite companies purchase signals for this programming 

from local broadcast stations, broadcast television networks (ABC, CBS, Fox, and 

NBC), and providers of cable programming (such as CNN, ESPN, and HBO). 

They then transmit these signals from uplinks located outside Ohio to the 

satellites, which in turn send the signal directly to small satellite dish antennas 

mounted on or near the home of the subscriber to be received by a decoder box 
January Term, 2010 

3 

and displayed on the subscriber’s television. Other than the antenna and receiver 

at the subscriber’s home, this method of delivery does not require the use of 

additional ground-receiving and/or distribution facilities in Ohio. 

{¶ 3} In the pay-television market, the satellite companies – neither of 

which is headquartered in Ohio – compete with cable companies, which use 

ground receiving and distribution facilities to provide television programming to 

customers. For cable television distribution, the process begins at the “headend,” 

a facility, usually located in or near the franchise area, that contains the collection 

of antennas that the cable television provider uses to gather programming from 

local, in-state, and out-of-state sources. However, with cable company 

consolidation and technological advances, there has been a reduction in the 

number of headends, and some cable companies use headends located out of state. 

From the headend, coaxial or fiber-optic cables and amplifiers located either on 

utility poles or below the ground carry the signal to “hubs” servicing areas of 

10,000 to 20,000 customers, which then direct the signal through feeder lines to 

“nodes” serving particular neighborhoods. 

{¶ 4} These cables run along public rights of way, and cable companies 

enter franchise agreements with local governments and pay a franchise fee to 

secure this right of access. The franchise fee may vary by locality, but federal law 

prohibits the fee from exceeding five percent of gross revenues. While the cable 

companies’ mode of distribution necessitates a local footprint, none of the major 

cable companies operating in Ohio are headquartered in Ohio, and all serve an 

interstate market. 

The Sales Tax on Satellite Broadcasting Service 

{¶ 5} Prior to 2003, Ohio did not tax sales of cable or satellite television 

service. That year, however, the General Assembly considered a bill that would 

have taxed sales of both services equally. H.B. No. 95, as introduced in the 125th 

General Assembly, proposed to enact R.C. 5739.01(B)(3)(q) to define “sale” as 
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4 

including “transactions by which * * * [c]able and satellite television service is or 

is to be provided.” As a result, the cable and satellite television industries 

retained lobbyists to protect their interests, and ultimately the legislature amended 

the bill to enact a sales tax on “satellite broadcasting service” alone. See R.C. 

5739.01(B)(3)(p) (150 Ohio Laws, Part I, 396, and Part II, 1996). The General 

Assembly’s definition of “satellite broadcasting service” in R.C. 5739.01(XX) 

does not include transactions involving the distribution of pay-television 

programming using ground receiving or distribution equipment, and the sale of 

cable television programming is therefore not subject to the tax. 

Procedural History 

{¶ 6} In response to this legislation, the satellite companies filed a 

declaratory-judgment complaint in the Franklin County Common Pleas Court 

seeking a declaration that the tax on sales of satellite television service but not on 

sales of cable television service had both the purpose and effect of favoring instate economic interests in violation of the Commerce Clause. 

{¶ 7} The trial court entered a partial summary judgment in favor of the 

satellite companies, declaring the sales tax on satellite broadcasting services to be 

unconstitutional because “[t]he differential tax treatment of [satellite and cable 

television providers] is directly correlated with whether they use certain local

ground receiving and distribution equipment. * * * [T]he practical effect of the 

differential tax treatment is to benefit in-state economic interests while burdening 

out-of-state economic interests, thereby discriminating against interstate 

commerce in violation of the Commerce Clause * * *.” (Emphasis sic.) 

{¶ 8} The trial court also concluded that a genuine issue of material fact 

existed regarding whether the General Assembly had intentionally discriminated 

against interstate commerce in levying the tax, and the court denied summary 

judgment on that issue. However, the court rejected the satellite companies’ 
January Term, 2010 

5 

argument that the sales tax facially discriminated against interstate commerce, a 

position the satellite companies have since abandoned. 

{¶ 9} The tax commissioner appealed, and the Tenth District Court of 

Appeals reversed the judgment of the trial court and held that the Commerce 

Clause is not violated when the differential tax treatment of two categories of 

companies results solely from differences between the nature of their businesses, 

not from the location of their activities. DIRECTV v. Levin, 181 Ohio App.3d 92, 

2009-Ohio-636, 907 N.E.2d 1242. The court explained that because both of these 

providers are engaged in interstate commerce, the sales tax did not discriminate 

against the interstate market for pay television, but merely against one interstate 

company competing in that market. Id. at ¶ 27–28. The appellate court further 

determined that the trial court erred in denying the tax commissioner’s motion for 

summary judgment on the issue of whether there was purposeful discrimination 

and directed the trial court to enter summary judgment for the tax commissioner 

on all claims. Id. at ¶ 35. 

{¶ 10} We accepted the satellite companies’ discretionary appeal. 

DIRECTV, Inc. v. Levin, 122 Ohio St.3d 1454, 2009-Ohio-3131, 908 N.E.2d 945. 

Arguments on Appeal 

{¶ 11} The satellite companies urge that the sales tax imposed by R.C. 

5739.01(B)(3)(p) discriminates against interstate commerce in practice because 

the tax gives preferential treatment to “cable TV companies [that] have invested a 

fortune in building and maintaining a network of ‘ground receiving or distribution 

equipment’ – including thousands of buildings and tens of thousands of miles of 

cable – in Ohio,” while satellite service is taxed “because its providers have 

devised a way to deliver the same service without installing any ‘ground or 

receiving or distribution equipment’ in Ohio.” According to the satellite 

companies, a state may not distinguish between companies engaged in interstate 

commerce if the distinction turns on the extent of economic investment in the 
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6 

state, notwithstanding any differences in the manner in which the firms conduct 

business. Thus, they maintain that any discrimination in tax treatment that 

depends on the existence of ground receiving or distributing equipment in Ohio is 

unconstitutional. 

{¶ 12} The satellite companies also assert that the court of appeals left 

undisturbed the trial court’s conclusion that a genuine issue of material fact 

remains regarding whether the General Assembly intentionally discriminated 

against them in enacting R.C. 5739.01(B)(3)(p), and they argue that statements 

made by lobbyists for the cable industry to legislators regarding the statute’s 

purpose and effect are relevant and admissible in proving discrimination against 

interstate commerce. 

{¶ 13} The tax commissioner responds that the tax “simply differentiates 

between two forms of interstate commerce, not between a local economic activity 

and an out-of-state economic activity.” Tax differentials, he asserts, are not 

“prohibited simply because the business adversely affected by the tax treatment 

generates less economic activity in the subject state than the business that 

received favorable tax treatment.” The tax commissioner maintains that even if 

the tax technically discriminates against commerce, the sales tax may be 

“properly sustained as ‘compensatory’ or ‘complementary’ ” to the franchise fees 

imposed on cable companies. Also, he contends that the satellite companies have 

abandoned the issue of intentional discrimination. 

{¶ 14} Accordingly, we are called upon to consider whether the sales tax 

levied by R.C. 5739.01(B)(3)(p) on satellite broadcasting services but not on 

cable broadcasting services discriminates against interstate commerce in violation 

of the Commerce Clause. 

Law and Analysis 

Standard of Review 
January Term, 2010 

7 

{¶ 15} At the outset, we note that our review of a summary judgment is de 

novo. Comer v. Risko, 106 Ohio St.3d 185, 2005-Ohio-4559, 833 N.E.2d 712, 

¶ 8. “Summary judgment is appropriate if (1) no genuine issue of any material 

fact remains, (2) the moving party is entitled to judgment as a matter of law, and 

(3) it appears from the evidence that reasonable minds can come to but one 

conclusion, and construing the evidence most strongly in favor of the nonmoving 

party, that conclusion is adverse to the party against whom the motion for 

summary judgment is made.” State ex rel. Duncan v. Mentor City Council, 105 

Ohio St.3d 372, 2005-Ohio-2163, 826 N.E.2d 832, ¶ 9. 

{¶ 16} In determining whether a law discriminates against interstate 

commerce, the United States Supreme Court has “eschewed formalism for a 

sensitive, case-by-case analysis of purposes and effects.” W. Lynn Creamery, Inc. 

v. Healy (1994), 512 U.S. 186, 201, 114 S.Ct. 2205, 129 L.Ed.2d 157. Further, as 

the court explained in Hughes v. Oklahoma (1979), 441 U.S. 322, 336, 99 S.Ct. 

1727, 60 L.Ed.2d 250, “[t]he burden to show discrimination rests on the party 

challenging the validity of the statute” – in this case, the satellite companies. 

The Dormant Commerce Clause 

{¶ 17} The United States Constitution provides that Congress shall have 

the power “[t]o regulate Commerce * * * among the several States.” Clause 3, 

Section 8, Article I. However, although the terms of the Commerce Clause “do 

not expressly restrain ‘the several States’ in any way,” the Supreme Court has 

“sensed a negative implication in the provision since the early days.” Kentucky 

Dept. of Revenue v. Davis (2008), 553 U.S. 328, 337, 128 S Ct. 1801, 170 

L.Ed.2d 685. Thus, the court has “long interpreted the Commerce Clause as an 

implicit restraint on state authority.” United Haulers Assn., Inc. v. OneidaHerkimer Solid Waste Mgt. Auth. (2007), 550 U.S. 330, 338, 127 S.Ct. 1786, 167 

L.Ed.2d 655. This concept of “negative implication” and “implicit restraint” is 

known as the “negative” or “dormant” Commerce Clause. 
SUPREME COURT OF OHIO

8 

{¶ 18} The doctrine of the dormant Commerce Clause traces its roots to 

“[t]he desire of the Forefathers to federalize regulation of foreign and interstate 

commerce.” H.P. Hood & Sons, Inc. v. Du Mond (1949), 336 U.S. 525, 533, 69 

S.Ct. 657, 93 L.Ed. 865. As the court explained in Camps Newfound/Owatonna, 

Inc. v. Harrison (1997), 520 U.S. 564, 571, 117 S.Ct. 1590, 137 L.Ed.2d 852, 

“During the first years of our history as an independent confederation, the 

National Government lacked the power to regulate commerce among the States. 

Because each State was free to adopt measures fostering its own local interests 

without regard to possible prejudice to nonresidents, what Justice Johnson 

characterized as a ‘conflict of commercial regulations, destructive to the harmony 

of the States,’ ensued.” Id., quoting Gibbons v. Ogden (1824), 22 U.S. (9 Wheat.) 

1, 224, 6 L.Ed. 23 (Johnson, J., concurring). 

{¶ 19} Accordingly, the modern cases arising under what has become 

known as the dormant Commerce Clause are “driven by concern about ‘economic 

protectionism—that is, regulatory measures designed to benefit in-state economic 

interests by burdening out-of-state competitors.’ ” Kentucky Dept. of Revenue, 

553 U.S. at 337–338, 128 S.Ct. 1801, 170 L.Ed.2d 685, quoting New Energy Co. 

of Indiana v. Limbach (1988), 486 U.S. 269, 273–274, 108 S.Ct. 1803, 100 

L.Ed.2d 302. The dormant Commerce Clause thus enshrines the economic policy 

of the framers to prohibit states from erecting barriers to free trade across state 

borders and from enacting laws that favor local enterprises at the expense of outof-state businesses. Boston Stock Exchange v. New York State Tax Comm. (1977), 

429 U.S. 318, 328-329, 97 S.Ct. 599, 50 L.Ed.2d 514. 

{¶ 20} The Supreme Court has therefore recognized that “[n]o State, 

consistent with the Commerce Clause, may ‘impose a tax which discriminates 

against interstate commerce * * * by providing a direct commercial advantage to 

local business.’ ” (Ellipsis sic.) Id. at 329, quoting Northwestern States Portland 

Cement Co. v. Minnesota (1959), 358 U.S. 450, 458, 79 S.Ct. 357, 3 L.Ed.2d 421. 
January Term, 2010 

9 

{¶ 21} The court has pointed out, however, that the Commerce Clause of 

the United States Constitution “protects the interstate market, not particular 

interstate firms” or “particular structure[s] or methods of operation in a retail 

market.” Exxon Corp. v. Gov. of Maryland (1978), 437 U.S. 117, 127, 98 S.Ct. 

2207, 57 L.Ed.2d 91. Therefore, differential tax treatment of “two categories of 

companies result[ing] solely from differences between the nature of their 

businesses, [and] not from the location of their activities,” does not violate the 

dormant Commerce Clause. Amerada Hess Corp. v. Dir., Div. of Taxation, New 

Jersey Dept. of the Treasury (1989), 490 U.S. 66, 78, 109 S.Ct. 1617, 104 

L.Ed.2d 58. 

{¶ 22} Relying on the decisions of the United States Supreme Court in 

Exxon and Amerada Hess, every state and federal court considering Commerce 

Clause challenges brought by the satellite industry arguing against state tax 

measures as favoring the cable industry has held that these taxes do not violate the 

dormant Commerce Clause because they do not discriminate against interstate 

commerce. 

{¶ 23} In DIRECTV, Inc. v. Treesh (E.D.Ky.2006), 469 F.Supp.2d 425, 

the court considered a Kentucky tax statute that imposed a sales tax on both 

satellite and cable services but prohibited local governments from imposing 

franchise fees on cable companies while allowing cable companies a tax credit for 

the amount of any such fee imposed. The satellite companies claimed that 

allowing cable companies free access to public rights-of-way to install 

infrastructure within the state of Kentucky gave the cable companies a tax 

advantage not shared with satellite companies, whose service is provided through 

satellites located outside the state of Kentucky. 

{¶ 24} The district court dismissed the complaint, finding that the tax did 

not distinguish between in-state and out-of-state economic interests and had 

neither discriminatory purpose nor effect. The court noted that the cable 
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10 

companies could not be characterized as in-state interests and that “[t]he different 

effects of Kentucky’s new tax provisions on Satellite Companies and Cable 

Companies are owed not to the geographic location of the companies, but to their 

different delivery mechanisms,” explaining that the tax statute had the same effect 

regardless of whether the satellite or cable companies located their operations 

inside or outside the state. Id. at 437-438. 

{¶ 25} The Sixth Circuit Court of Appeals affirmed and noted: “While a

purpose of the [Kentucky tax statute] might have been to aid the cable industry 

rather than the satellite industry because the former has a larger in-state presence 

than the latter, there were clearly many other purposes including assessing some 

tax against a satellite industry that is rapidly growing * * *.” (Emphasis sic.) 

DIRECTV v. Treesh (C.A.6, 2007), 487 F.3d 471, 480. 

{¶ 26} The court went on to recognize that (1) cable and satellite 

companies provide consumers with two distinct goods, “consisting of two very 

different means of delivering broadcasts,” id. at 480, (2) “the dormant Commerce 

Clause is intended to protect interstate commerce, and not particular firms 

engaged in interstate commerce, or the modes of operation used by those firms,” 

id. at 481, and (3) “differential tax treatment of ‘two categories of companies 

result[ing] solely from differences between the nature of their businesses, [and] 

not from the location of their activities’ does not violate the dormant Commerce 

Clause.” Id., quoting Amerada Hess, 490 U.S. at 78, 109 S.Ct. 1617, 104 L.Ed.2d 

58. The Sixth Circuit emphasized that “applying the dormant Commerce Clause 

in cases that do not present the equivalent of a protective tariff” — i.e., where the 

tax does not draw geographic lines, favor local products, or promote local 

companies — would “dramatically increase the clause’s scope.” 487 F.3d at 481. 

The Supreme Court of the United States denied a writ of certiorari. See 

DIRECTV, Inc. v. Treesh (2008), 552 U.S. 1311, 128 S.Ct. 1876, 170 L.Ed.2d 

746. 
January Term, 2010 

11 

{¶ 27} In addition, the satellite companies challenged a North Carolina 

statute that imposed a sales tax on “direct-to-home satellite service” but not on 

cable television service. The North Carolina Court of Appeals rejected the 

Commerce Clause challenge, explaining that the tax “does not make any 

geographical distinctions, but merely describes one method of providing 

television programming services to North Carolina subscribers.” DIRECTV, Inc. 

v. State (2006), 178 N.C.App. 659, 663, 632 S.E.2d 543. Moreover, the tax 

“does not discriminate against [the satellite companies] in favor of a local industry 

[because] cable companies are no more ‘local’ in nature than are satellite 

companies.” Id. at 664. See also DIRECTV, Inc. v. Tolson (E.D.N.C.2007), 498 

F.Supp.2d 784, 800, affirmed (C.A.4, 2008), 513 F.3d 119 (dismissing the 

satellite companies’ complaint on other grounds, but explaining that the amended 

North Carolina statute imposing an equal tax on satellite and cable companies 

while revoking authority of local government to impose franchise fees does not 

violate the Commerce Clause). 

The Ohio Sales Tax 

{¶ 28} R.C. 5739.02 imposes a tax “on each retail sale made in this state.” 

R.C. 5739.01(B)(3)(p) defines “sale” to include “transactions for a consideration 

in any manner” by which “satellite broadcasting service is or is to be provided.” 

R.C. 5739.01(XX) further defines “satellite broadcasting service” to mean “the 

distribution or broadcasting of programming or services by satellite directly to the 

subscriber’s receiving equipment without the use of ground receiving or 

distribution equipment, except the subscriber’s receiving equipment or equipment 

used in the uplink process to the satellite.” (Emphasis added.) As the parties 

agree, the phrase “without the use of ground receiving or distribution equipment” 

clarifies that sales of cable broadcasting services are not subject to the tax. 

{¶ 29} In reviewing the application of this statute to the facts here, we 

conclude that the sales tax imposed on satellite broadcasting services but not cable 
SUPREME COURT OF OHIO

12 

broadcasting services does not violate the Commerce Clause of the United States 

Constitution. The statute’s application depends on the technological mode of 

operation, not geographic location, and while it distinguishes between different 

types of interstate firms, it does not favor in-state interests at the expense of outof-state enterprises. See DIRECTV, 487 F.3d at 480-481; DIRECTV, 469 

F.Supp.2d at 437-438; DIRECTV, 498 F.Supp.2d at 800; DIRECTV, 178 

N.C.App. at 663, 632 S.E.2d 543. 

{¶ 30} Here, the tax applies to a transaction involving pay-television 

services depending only on the technological mode of distribution of those 

services. The General Assembly used the phrase “ground receiving or 

distribution equipment” in R.C. 5739.01(XX) to track the definition of “direct-tohome satellite service” set forth in the notes to Section 152, Title 47, U.S.Code, 

which authorize states to tax satellite-television service. See Pub.L. No. 104-104, 

Title VI, Section 602(b)(1), 110 Stat. 144 (1996). The General Assembly defined 

“satellite broadcasting service” to correspond with this federal authorization and 

to identify the taxable transaction by the method of distributing pay-television 

services, not to protect companies that have invested in a ground distribution 

system or to encourage investment in such a system. 

{¶ 31} Application of the sales tax does not depend on the geographic 

location of the programming provider. Rather, the sale of satellite broadcasting 

services is subject to tax regardless of whether the provider is an in-state or outof-state business and without considering the amount of local economic activity 

or investment in facilities that the satellite companies bring to Ohio. A satellite 

company that is headquartered in Ohio, builds its uplink in Ohio, employs only 

Ohio residents, and provides programming only to Ohio customers is as 

responsible for collecting the tax as any out-of-state company providing the same 

services using the same mode of distribution. 
January Term, 2010 

13 

{¶ 32} Conversely, the cable industry is not a local interest benefited at 

the expense of out-of-state competitors. Like the satellite companies, the major 

cable providers are interstate companies selling an interstate product to an 

interstate market. Both the satellite and cable industries serve customers in Ohio, 

own property in Ohio, and employ residents of Ohio, but no major pay-television 

provider is headquartered in Ohio or could otherwise be considered more local 

than any other. Thus, the sales tax does not reflect “differential treatment of instate and out-of-state economic interests that benefits the former and burdens the 

latter.” Oregon Waste Sys., Inc. v. Oregon Dept. of Environmental Quality 

(1994), 511 U.S. 93, 99, 114 S.Ct. 1345, 128 L.Ed.2d 13. Rather, the tax 

regulates among these interests even-handedly based on the technological mode 

of operation. 

{¶ 33} The cases on which the satellite companies rely are 

distinguishable. In Granholm v. Heald (2005), 544 U.S. 460, 125 S.Ct. 1885, 161 

L.Ed.2d 796, the states of Michigan and New York imposed regulations allowing 

in-state, but not out-of-state, wineries to make direct sales to customers, while in 

Bacchus Imports, Ltd. v. Dias (1984), 468 U.S. 263, 104 S.Ct. 3049, 82 L.Ed.2d 

200, the state of Hawaii excepted certain alcoholic beverages using locally 

produced ingredients from the state liquor tax. In Armco Inc. v. Hardesty (1984), 

467 U.S. 638, 104 S.Ct. 2620, 81 L.Ed.2d 540, the state of West Virginia imposed 

a wholesale tax on goods manufactured out of state but not on goods made in 

state, and in Westinghouse Elec. Corp. v. Tully (1984), 466 U.S. 388, 390, 104 

S.Ct. 1856, 80 L.Ed.2d 388, the state of New York gave a tax credit only to those 

corporations whose subsidiaries exported goods from New York. And in Boston 

Stock Exchange, 429 U.S. at 328-329, 97 S.Ct. 599, 50 L.Ed.2d 514, the state 

imposed a greater tax liability on out-of-state transactions than on in-state 

transactions. 
SUPREME COURT OF OHIO

14 

{¶ 34} In those cases, the respective states acted to protect local interests 

at the expense of out-of-state competitors. In sharp contrast, the Ohio tax does 

not protect local industries or treat in-state companies differently from out-of-state 

companies, nor does it provide a tax incentive for companies to move operations 

or direct business to Ohio. 

{¶ 35} Therefore, we concur with those courts that have considered the 

merits of the satellite companies’ dormant Commerce Clause claims and conclude 

that the Ohio sales tax on satellite broadcasting services does not discriminate 

against interstate commerce in violation of the Commerce Clause of the United 

States Constitution. 

The Admissibility of Lobbyist Statements 

{¶ 36} The satellite companies assert that statements made by lobbyists 

for the cable industry are admissible to prove both the practical effect of the sale 

tax and the intent of the General Assembly in enacting it. We need not reach the 

merits of this claim. 

{¶ 37} Assuming for purposes of this argument that the statements would 

be admissible to prove the discriminatory effect of the sales tax, these statements 

would not affect our conclusion that the sales tax does not discriminate against 

commerce in practical effect. 

{¶ 38} And to the extent that the satellite companies rely on the lobbyist 

statements to show that the General Assembly passed the sales tax with a 

discriminatory intent, we are unable to reach that issue because the satellite 

companies failed to preserve their intentional-discrimination claim for our review. 

Here, the court of appeals reversed the trial court’s decision to deny summary 

judgment in favor of the tax commissioner on the claim that the state purposefully 

discriminated against interstate commerce, ordering “the trial court to enter 

summary judgment for defendant-appellant Richard A. Levin, Tax Commissioner 
January Term, 2010 

15 

of Ohio” and ending this litigation subject only to appeal. DIRECTV, 181 Ohio 

App.3d 92, 2009-Ohio-636, 907 N.E.2d 1242, ¶ 6, 29, and 35. 

{¶ 39} However, in their memorandum in support of jurisdiction in this 

court, the satellite companies did not argue that the court of appeals erred by 

ordering summary judgment for the tax commissioner on this issue. They sought 

review only of the evidentiary issue regarding whether evidence of lobbyist 

statements is relevant and admissible. Not only did the satellite companies fail to 

attack the order directing summary judgment against them in their initial brief 

filed here, but they also asserted that the appellate court had not actually ruled 

against them on this point. 

{¶ 40} By failing to challenge the decision granting summary judgment in 

favor of the tax commissioner on the intentional-discrimination claim in either 

their memorandum in support of jurisdiction or their initial brief, the satellite 

companies failed to preserve that claim for review. See, e.g., Estate of Ridley v. 

Hamilton Cty. Bd. of Mental Retardation & Dev. Disabilities, 102 Ohio St.3d 230, 

2004-Ohio-2629, 809 N.E.2d 2, ¶ 18 (declining to consider issues not set forth in 

the appellant’s memorandum in support of jurisdiction); Utility Serv. Partners, 

Inc. v. Pub. Util. Comm., 124 Ohio St.3d 284, 2009-Ohio-6764, 921 N.E.2d 1038, 

¶ 54 (explaining that the appellant “failed to preserve” an argument “raised for the 

first time on reply”). Accordingly, we decline to address this issue. 

Conclusion 

{¶ 41} Differential tax treatment of two categories of companies resulting 

solely from differences between the nature of their businesses, not from the 

location of their activities, does not violate the Commerce Clause of the United 

States Constitution. The Ohio General Assembly imposed a sales tax that makes 

no distinction between local and interstate commerce, but rather distinguishes 

based only on the mode of distributing television programming. For these 

reasons, the judgment of the court of appeals is affirmed. 
SUPREME COURT OF OHIO

16 

Judgment affirmed. 

LUNDBERG STRATTON, O’CONNOR, LANZINGER, and CUPP, JJ., concur. 

BROWN, C.J., and PFEIFER, J., dissent. 

__________________ 

BROWN, C.J., dissenting. 

{¶ 42} Cable companies and satellite companies sell the same thing: paytelevision service. But in Ohio they are not taxed the same. Satellite companies 

must collect the 5 1/2 percent sales tax; cable companies do not. 

{¶ 43} Why the difference? When the tax bill was introduced, it imposed 

an equal tax regardless of seller. Cable-television lobbyists stepped in and drew 

the legislature’s attention to certain economic realities: the cable industry directly 

employs exponentially more Ohioans (6,000) than the satellite industries (a 

“nominal” number) and pays exponentially more taxes (over $100 million 

annually) than satellite (“nominal” amounts). According to the cable industry, 

“the proposed sales tax on cable service penalizes the cable industry for [its] deep 

roots in this state and rewards a competing out-of-state industry who profits from 

Ohioans.” That “out-of-state industry” is the satellite industry, which “[p]rovides 

Ohioans with very few job opportunities,” “[d]oesn’t pay an appreciable tax of 

any kind anywhere in Ohio,” and “[p]rovides little support to local communities.” 

{¶ 44} What the cable companies could see, the majority cannot: it is in 

Ohio’s economic interest to support the cable industry’s jobs and investment, and 

relieving the cable industry of the sales tax benefits that interest. I am all in favor 

of promoting employment and investment in this state, but as I read the law, this 

particular road is not open to us. 

States May Not Impose Discriminatory Taxes to Favor 

Local Jobs and Investment 

{¶ 45} The black-letter rule is clear. The Commerce Clause forbids states 

to discriminate against interstate commerce, and discrimination “ ‘simply means 
January Term, 2010 

17 

differential treatment of in-state and out-of-state economic interests that benefits 

the former and burdens the latter.’ ” United Haulers Assn., Inc. v. OneidaHerkimer Solid Waste Mgt. Auth. (2007), 550 U.S. 330, 338, 127 S.Ct. 1786, 167 

L.Ed.2d 655, quoting Oregon Waste Sys., Inc. v. Dept. of Environmental Quality 

(1994), 511 U.S. 93, 99, 114 S.Ct. 1345, 128 L.Ed.2d 13. 

{¶ 46} States have an economic interest not only in “mom and pop” 

businesses, but in all forms of local investment. So it ignores economic reality to 

focus narrowly on the location of ownership or headquarters. While local 

ownership and headquarters might benefit the local economy, the amount of 

benefit depends on jobs and revenue. And a business need not be locally owned 

or headquartered to benefit the local economy. For instance, one fairly suspects 

that the city of Marysville, if forced to choose, would take the Honda plant over 

any homegrown business, and perhaps over any dozen. 

{¶ 47} This is common sense, and numerous cases confirm it. Local 

investment, not simply locally headquartered businesses, may not be promoted 

through discriminatory taxation. See, e.g., C & A Carbone, Inc. v. Clarkstown 

(1994), 511 U.S. 383, 392, 114 S.Ct. 1677, 128 L.Ed.2d 399 (“Discrimination 

against interstate commerce in favor of local business or investment is per se

invalid * * *” [emphasis added]); Lewis v. BT Invest. Managers, Inc. (1980), 447 

U.S. 27, 42, 100 S.Ct. 2009, 64 L.Ed.2d 702 (prohibited “local favoritism or 

protectionism” includes discrimination among businesses according to the extent 

of their contacts with the local economy or based on the extent of local 

operations); Fulton Corp. v. Faulkner (1996), 516 U.S. 325, 344, 116 S.Ct. 848, 

133 L.Ed.2d 796 (“States may not impose discriminatory taxes on interstate 

commerce in the hopes of encouraging firms to do business within the State”). 

{¶ 48} Local investment, of course, includes the creation or preservation 

of local jobs. The Supreme Court has accordingly found “parochial legislation” 

to be constitutionally invalid when “the ultimate aim” of the legislation is “to 
SUPREME COURT OF OHIO

18 

create jobs by keeping industry within the State.” Philadelphia v. New Jersey

(1978), 437 U.S. 617, 627, 98 S.Ct. 2531, 57 L.Ed.2d 475; see also Baldwin v. 

G.A.F. Seelig, Inc. (1935), 294 U.S. 511, 527, 55 S.Ct. 497, 79 L.Ed. 1032 (the 

power to tax may not be used to establish “an economic barrier against 

competition with the products of another state or the labor of its residents”); 

South-Central Timber Dev., Inc. v. Wunnicke (1984), 467 U.S. 82, 100, 104 S.Ct. 

2237, 81 L.Ed.2d 71 (“the Commerce Clause forbids a State to require work to be 

done within the State for the purpose of promoting employment”). 

{¶ 49} Lower federal courts have recognized the same point. See, e.g., 

Pelican Chapter, Associated Builders & Contrs., Inc. v. Edwards (C.A.5, 1997), 

128 F.3d 910, 918 (“patent economic protectionism” includes “[r]educing 

unemployment by discouraging the use of out-of-state labor”); Louisiana Dairy 

Stabilization Bd. v. Dairy Fresh Corp. (C.A.5, 1980), 631 F.2d 67, 70 (the 

Commerce Clause prevents a state from burdening interstate commerce for the 

purpose of “preventing local economic disruption”); Mapco, Inc. v. Grunder

(N.D.Ohio 1979), 470 F.Supp. 401, 412 (Commerce Clause is violated by a 

differential tax on high- and low-sulfur coal that is intended to “protect and favor 

the Ohio high-sulfur coal industry (both workers and management)” and prevent 

“the likely loss of jobs of Ohio coal miners”). 

{¶ 50} Under these principles, the sales tax is unconstitutional. It treats 

sellers of the same service differently. That’s discrimination. It favors the sellers 

who invest locally and burdens the sellers who do not. That’s favoritism of instate over out-of-state economic interests. Together, these features place the sales 

tax well within the prohibition of the dormant Commerce Clause. 

The Sixth Circuit Decision in DIRECTV v. Treesh 

Does Not Resolve This Case 

{¶ 51} The majority follows the Sixth Circuit’s statement in DIRECTV, 

Inc. v. Treesh (C.A.6, 2007), 487 F.3d 471, 481, that “the dormant Commerce 
January Term, 2010 

19 

Clause is intended to protect interstate commerce, and not particular firms 

engaged in interstate commerce, or the modes of operation used by those firms.” 

Treesh derived this rule from a pair of Supreme Court decisions, Exxon Corp. v. 

Gov. of Maryland (1978), 437 U.S. 117, 127, 98 S.Ct. 2207, 57 L.Ed.2d 91, and 

Amerada Hess Corp. v. Dir., Div. of Taxation, New Jersey Dept. of Treasury

(1989), 490 U.S. 66, 109 S.Ct. 1617, 104 L.Ed.2d 58. For several reasons, I am 

not persuaded that Treesh provides the answer to this case. 

{¶ 52} First, Treesh is not on point. It reviewed a materially different tax 

structure. Kentucky had imposed an even-handed sales tax that treated cable and 

satellite the same way. There was no discrimination; without discrimination, 

there is no Commerce Clause claim. Treesh boiled down to whether a state must

charge cable companies for use of rights-of-way, see 487 F.3d at 479, a much 

different question from the one presented here. 

{¶ 53} Nevertheless, it is true that Treesh went on to suggest that under 

Exxon and Amerada Hess, the Commerce Clause does not prohibit differential 

taxation of the cable and satellite industries. I disagree that these cases save this 

tax. 

Exxon and Amerada Hess Do Not Immunize Discriminatory Taxes 

{¶ 54} Neither Exxon nor Amerada Hess allows discriminatory taxation so 

long as both sides may be called “interstate firms” or use different “modes of 

operation.” The plaintiffs in those cases lost because the court could discern no 

differential treatment of in-state and out-of-state interests. 

{¶ 55} In Amerada Hess, the plaintiff oil companies alleged that the state 

tax favored independent retailers who do not produce oil over oil producers who 

market their own oil. 490 U.S. at 78, 109 S.Ct. 1617, 104 L.Ed.2d 58. But as the 

court pointed out, nonproducing retailers may operate both in the taxing state and 

outside it, and the tax treated all nonproducing retailers the same. Id. As the 

plaintiffs failed to identify a discrete, favored state interest, Amerada Hess
SUPREME COURT OF OHIO

20 

characterized the tax difference as resulting “solely from differences between the 

nature of [competing] businesses.” Id. The key word is “solely,” a word that 

cannot be used here. 

{¶ 56} Similarly, in Exxon, the plaintiff oil companies alleged that the 

effect of a particular tax was to protect in-state independent dealers from out-ofstate competition. 437 U.S. at 125, 98 S.Ct. 2207, 57 L.Ed.2d 91. But as the court 

pointed out, “there are several major interstate marketers of petroleum that own 

and operate their own retail gasoline stations,” and “in-state independent dealers 

will have no competitive advantage over out-of-state dealers.” Id. at 125–126. 

Thus, when Exxon stated that the Commerce Clause does not protect “the 

particular structure or methods of operation in a retail market,” it had already 

concluded that the challenged tax was not discriminatory. 

{¶ 57} Neither case involved an identifiable in-state, out-of-state line. So 

these cases stand for the modest proposition that the Commerce Clause permits 

states to distinguish among differing kinds of businesses, so long as the 

distinctions do not favor local economic interests. (Such distinctions could be 

challenged under the generally more lenient Equal Protection Clause.) But 

operational differences do not immunize protectionist discrimination—indeed, 

Amerada Hess and Exxon prove the point: despite clear operational differences in 

each case, the court still looked for location-based discrimination. It simply could 

not find it. 

{¶ 58} “[N]o single conceptual approach identifies all of the factors that 

may bear on a particular case.” Raymond Motor Transp., Inc. v. Rice (1978), 434 

U.S. 429, 441, 98 S.Ct. 787, 54 L.Ed.2d 664. And more broadly, courts should 

“think things not words.” United States v. McGuire (C.A.7, 2010), 627 F.3d 622, 

624, 2010 WL 4908001, at *3. However selectively those cases may be quoted, 

Exxon and Amerada Hess have little bearing here. 

The Sales Tax Creates an Incentive to Invest in Ohio 
January Term, 2010 

21 

{¶ 59} The majority also suggests that the sales tax provides no incentive 

for the satellite companies to locate infrastructure in Ohio. This is not true. 

{¶ 60} All other things being equal, the sales tax does give incentive to 

pay-TV companies to distribute signals using in-ground cable instead of satellites. 

Indeed, if the satellite companies installed an in-ground cable network, they 

would avoid the sales tax. Of course, given how much they have already invested 

in a different mode of delivery, that is an impossibly high price to pay. 

{¶ 61} Following this point through, if the satellite companies did the 

unthinkable and installed an in-ground cable network, they would avoid the Ohio 

sales tax, and they would bring jobs, franchise fees, and property taxes to Ohio. 

This fact only confirms that favoring cable companies benefits in-state economic 

interests. 

Reversal Would Not Expand the Scope of the Dormant Commerce Clause 

{¶ 62} The majority does not address it, but the tax commissioner raises a 

form of the “floodgates” defense. He says that invalidating the sales tax would 

“create a nightmare for legislators and the courts to administer as no two interstate 

players have the same relative economic presence in each state in which they do 

business,” and this presence “could literally change by the moment as one 

business elects to move its infrastructure around the country.” 

{¶ 63} The risk of deluge is overstated. This case could not recur without 

the following elements: (1) a materially identical good or service, (2) two 

competing industries offering the good or service using distinct methods or modes 

of delivery, (3) one method making heavy use of the state’s land and labor, with 

the other virtually bypassing the state’s economic infrastructure, (4) different tax 

treatment of the materially identical good or service, (5) favorable treatment of 

the local method over the nonlocal, (6) indications in the evolution of the tax that 

it was motivated by protectionism, and (7) no constitutionally valid explanation 

for the tax. 
SUPREME COURT OF OHIO

22 

{¶ 64} I find it doubtful that such a fact pattern will often recur. The 

problem of comparing mismatched sets of “interstate players” is answered by the 

requirement that the favored and disfavored parties be similarly situated. See 

Gen. Motors Corp. v. Tracy (1997), 519 U.S. 278, 117 S.Ct. 811, 136 L.Ed.2d 

761. That requirement—which is met here, as cable and satellite unquestionably 

compete—would head off most problems, including the tellingly short parade of 

horribles marched out by the tax commissioner. And if this fact pattern did recur, 

it is unobjectionable that the Commerce Clause would prohibit it. 

The Compensatory-Tax Defense Would Not Save This Tax 

{¶ 65} The majority does not address the tax commissioner’s affirmative 

defense, but for the sake of completeness, I will. A protectionist tax can be saved 

if “it advances a legitimate local purpose that cannot be adequately served by 

reasonable nondiscriminatory alternatives.” New Energy Co. of Indiana v. 

Limbach (1988), 486 U.S. 269, 278, 108 S.Ct. 1803, 100 L.Ed.2d 302. The 

“standards for such justification are high,” however, invoking “ ‘the strictest 

scrutiny.’ ” Id. at 278–279, quoting Hughes v. Oklahoma (1979), 441 U.S. 322, 

337, 99 S.Ct. 1727, 60 L.Ed.2d 250. 

{¶ 66} The commissioner offers only one substantial nondiscriminatory 

justification: that the sales tax counterbalances the franchise fees that cable 

companies pay to local governments. This is the “compensatory tax” defense. 

See, e.g., Fulton Corp., 516 U.S. at 331, 116 S.Ct. 848, 133 L.Ed.2d 796. Often 

raised, this defense rarely wins. All of the following cases have rejected it: S. 

Cent. Bell Tel. Co. v. Alabama (1999), 526 U.S. 160, 169–170, 119 S.Ct. 1180, 

143 L.Ed.2d 258; Fulton Corp., 516 U.S. at 331–344, 116 S.Ct. 848, 133 L.Ed.2d 

796; Associated Industries of Missouri v. Lohman (1994), 511 U.S. 641, 648–649, 

114 S.Ct. 1815, 128 L.Ed.2d 639; Oregon Waste Sys., 511 U.S. at 104, 114 S.Ct. 

1345, 128 L.Ed.2d 13; Tyler Pipe Industries, Inc. v. Washington State Dept. of 
January Term, 2010 

23 

Revenue (1987), 483 U.S. 232, 244, 107 S.Ct. 2810, 97 L.Ed.2d 199; Armco Inc. 

v. Hardesty (1984), 467 U.S. 638, 642–643, 104 S.Ct. 2620, 81 L.Ed.2d 540; 

Maryland v. Louisiana (1981), 451 U.S. 725, 758, 101 S.Ct. 2114, 68 L.Ed.2d 

576; Boston Stock Exchange v. State Tax Comm. (1977), 429 U.S. 318, 332, 97 

S.Ct. 599, 50 L.Ed.2d 514. In the court’s own words, since 1937, it has “shown 

extreme reluctance to recognize new compensatory categories” beyond the salesand-use-tax combination. Fulton Corp., 516 U.S. at 338.

{¶ 67} Even assuming that individually negotiated franchise fees in this 

case constitute “taxes,” the compensatory-tax defense does not avail the tax 

commissioner. First, the sales tax and the franchise fees are not “substantially 

equivalent,” that is, “sufficiently similar in substance to serve as mutually 

exclusive ‘prox[ies]’ for each other.” Oregon Waste Sys., 511 U.S. at 103, 114 

S.Ct. 1345, 128 L.Ed.2d 13, quoting Armco, 467 U.S. at 643, 104 S.Ct. 2620, 81 

L.Ed.2d 540. For the sales tax, the taxable event is a transaction, the sale of 

television programming. See, e.g., Howell Air, Inc. v. Porterfield (1970), 22 Ohio 

St.2d 32, 34, 51 O.O.2d 62, 257 N.E.2d 742. Franchise fees are not taxes on the 

privilege of purchasing, but compensate the local government for the costs 

incurred in allowing and regulating access to public rights of way. 

{¶ 68} The real-world differences between the two industries confirm the 

legal conclusion that sales taxes and franchise fees cannot be equated. Cable must 

burden public property to deliver its signals—it must string cable on poles and 

bury it in the ground. Satellite does not impose these kinds of burdens, so 

requiring satellite companies to pay their proxy would not make sense. 

{¶ 69} But whereas only cable engages in the activity that triggers 

franchise fees, both cable and satellite engage in the activity taxed by the sales 

tax—both sell television programming. Thus, sparing the cable industry the sales 

tax does not equalize the tax burden so much as it eliminates a cost advantage 

held by satellite—the ability to deliver service without using public rights-of-way. 
SUPREME COURT OF OHIO

24 

{¶ 70} Finally, even if franchise fees were fairly comparable, the sales tax 

exceeds the amount of the franchise fee. See Oregon Waste, 511 U.S. at 103, 114 

S.Ct. 1345, 128 L.Ed.2d 13. The sales tax is currently 5 1/2 percent. R.C. 

5739.02(A)(1). Franchise fees are capped at five percent of gross receipts. 

Section 542(b), Title 47, U.S.Code. But some localities have agreed to less. For 

example, the city of Delaware has charged a fee as low as three percent. And 

whether through a later reduction of franchise fees or an increase of the sales tax, 

these disparities could increase. 

{¶ 71} In sum, the sales tax treats competing industries differently, 

effectively (and perhaps intentionally) favoring the industry with extensive local 

ties over the one with comparatively few. Such a law violates the Commerce 

Clause. For these reasons, I respectfully dissent and would reverse the judgment 

of the court of appeals. 

PFEIFER, J., concurs in the foregoing opinion. 

__________________ 

Orrick, Herrington & Sutcliff, L.L.P., E. Joshua Rosenkranz, and Jeremy 

N. Kudon; Steptoe & Johnson, L.L.P., Pantelis Michalopoulos, and Mark F. 

Horning; and Calfee, Halter & Griswold, L.L.P., and Peter A. Rosato, for 

appellants. 

Richard Cordray, Attorney General, and Lawrence D. Pratt, Alan P. 

Schwepe, Julie E. Brigner, Damion M. Clifford, and Barton A. Hubbard, 

Assistant Attorneys General, for appellee. 

David Parkhurst; and Vorys, Sater, Seymour & Pease, L.L.P., and Robert 

J. Krummen, urging affirmance for amicus curiae National Governors 

Association. 

Sutherland, Asbill & Brennan, L.L.P., and Eric S. Tresh; Walter 

Hellerstein; and Vorys, Sater, Seymour & Pease, L.L.P., Douglas R. Matthews, 
January Term, 2010 

25 

and Michael J. Hendershot, urging affirmance for amici curiae Time Warner 

Cable, ComCast, and Cox Communications. 

John A. Swain and David C. Crago, urging affirmance for amicus curiae 

Ohio Cable Telecommunications Association. 

Fleischman & Harding, L.L.P., Arthur H. Harding, Craig A. Gilley, and 

Micah M. Caldwell; and Ulmer & Berne, L.L.P., and Donald J. Mooney Jr., 

urging affirmance for amicus curiae Institute for Policy Innovation. 

Roy Cooper, North Carolina Attorney General, Christopher G. Browning 

Jr., Solicitor General, Gary R. Govert, Special Deputy Attorney General, and 

Michael D. Youth, Assistant Attorney General; Mark L. Shurtleff, Utah Attorney 

General, and Annina M. Mitchell, Solicitor General, urging affirmance for amici 

curiae states of North Carolina, Utah, Delaware, Florida, Illinois, Kansas, 

Kentucky, Maryland, Michigan, Mississippi, Missouri, Rhode Island, Tennessee, 

Virginia, and West Virginia. 

Shirley K. Sicilian and Sheldon H. Laskin, urging affirmance for amicus 

curiae Multistate Tax Commission. 

Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., Marcus W. 

Trathen, Charles F. Marshall, and Julia C. Ambrose; and Kegler, Brown, Hill & 

Ritter, L.P.A., and Paul D. Ritter Jr., urging affirmance for amicus curiae National 

Conference of State Legislatures. 

Jones Day, Douglas R. Cole, and Erik J. Clark, urging reversal for amicus 

curiae Constitutional Law Professors. 

Hinman & Carmichael, L.L.P., and John A. Hinman, urging reversal for 

amicus curiae Specialty Wine Retailers Association. 

Mark C. Ellison, urging reversal for amicus curiae National Rural 

Telecommunications Cooperative. 

Chester, Willcox & Saxbe, L.L.P., Gerhardt A. Gosnell II, and Donald C. 

Brey, urging reversal for amicus curiae Satellite Broadcasting and 
SUPREME COURT OF OHIO

26 

Communications Association, ACE Satellite, Buckeye Dish Installation, Inc., 

Cable Alternatives, Primeview Satellite, Kidwell Satellite, Richland County 

Satellite, Premiere Satellite & Electronics, Inc., Wells Family Equipment, Thobe 

TV, Felix Electronics, Vince’s TV & Appliance, Digi-Tech Satellite, Dudley 

Satellites, George’s Electronics, Inc., and Progressive Satellite. 

______________________