MAKING CABLE LESS TAXING

| April 11, 2019 | |

With April 15 looming, taxes are likely at the forefront of your mind. No one – individual or business – enjoys paying them. The Texas cable industry is supporting legislation this session that would eliminate a double a tax it currently pays, giving tax relief to tens of millions of Texas cable subscribers. This is the latest legislative effort supported by the cable industry in recent years to cut Texans’ telecommunications taxes that once were among the highest in the nation.

Currently, cable companies and other telecommunications providers that install lines in a city’s right-of-way (ROW) pay the city for the right to occupy that right-of-way. However, because of outdated and duplicative ROW laws – telephone providers pay per access line under Chapter 283 of the Local Government Code, and video providers pay franchise fees totaling up to 6% of gross revenue under Chapter 66 of the Public Utilities Act – that provider pays the city each time if it sends both telephone calls and video over the same wire, which is commonplace today.

While the impact to the city’s right-of-way has not changed, two different taxes apply to that one wire. This cost of telecommunications services is paid by Texas consumers. Think of it like paying the fee when you drive your car on a toll road: You agree that you’re required to pay a fee to use the toll road, but you don’t pay twice for having a second person in the vehicle with you.

The Texas Cable Association and its cable company members – Altice USA (which provides Suddenlink services), Cable ONE, Charter Spectrum and Comcast – are asking the Legislature to modernize ROW laws by requiring a provider to pay the city the larger of the two taxes – but not both. 

Ending this double tax for Texas consumers would erase this line item from their monthly bill, saving them an estimated $100 million each year. This amount is only a small percentage of the taxes and fees cable companies would continue to pay to the state of Texas and the cities they serve.

This bill makes Texas one of only two states (Florida being the other) considering legislation to lower taxes and fees imposed on telecommunications providers by millions of dollars, Forbes recently reported.

The Texas cable industry has a history over the past decade of advocating for state laws to lower the tax burden for both themselves and their customers. 

In 2013, TCA supported legislation to equalize the local and state sales taxes paid by cable companies and satellite providers. At the time, cable TV providers and their viewers were paying more than $200 million in annual sales taxes on top of local franchise fees that their satellite TV competitors didn’t have to pay. Had it passed, the tax break would have gone directly to consumers by freeing them from paying sales taxes on the first $75 of their monthly bills, effectively lowering their bills.

Today, only traditional cable providers – and as a result, their customers – pay full-freight state and local sales taxes and cities’ franchise ROW taxes. Streaming video services like Netflix are not subject to cities’ franchise taxes, nor are satellite customers, who also pay no local sales tax.

But Texas phone customers did find some relief from the Texas Legislature in 2013. As a result of passed legislation, the Public Utility Commission of Texas continued its efforts to reduce costs for Texas phone customers by cutting the Texas Universal Service Fund (TUSF) tax rate – a win for consumers in the fight to stop paying unnecessary taxes used to provide millions of dollars in taxpayer subsidies to major phone companies. For many consumers, these taxes added significantly to the overall monthly bills for home and business landlines and cell phones. 

The cut was a long time coming in the quest by the Texas Cable Association and others to reform an antiquated phone tax that has changed little since it was created in the late 1990s primarily to subsidize basic landline telephone service for Texans living in rural areas that sometimes were more expensive to serve. 

On the federal level, cable subscribers also are saving tax dollars thanks congressional action. The Internet Tax Freedom Act, which bans local, state and federal taxation of email and internet access, became permanent law when President Obama signed the Trade Facilitation and Trade Enforcement Act of 2015. One estimate suggested that the moratorium on Internet access taxes could equal as much as $6.5 billion each year. At that time, Texas was one of seven states that taxed internet subscription fees.

“By keeping internet access free from state and local taxes, ITFA (the Internet Tax Freedom Act) will permanently keep down the cost of connectivity, enable more American consumers and businesses to get online and allow the internet to further power economic growth,” said Michael Powell, president and CEO of NCTA – The Internet & Television Association, when the provision was passed by the U.S. Senate.

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