SALT LAKE CITY — Tax policy shouldn't determine the winner and losers in the cable or satellite marketplace, says Sen. Wayne Neiderhauser, whose attempt to evenly tax the competing television services prompted a flurry of emails from angry satellite subscribers.
The Republican from Sandy said Monday that he introduced SB112 to fix the discrepancy in taxes Utahns pay whether they subscribe to a cable or satellite service for television service, he said.
Satellite subscribers, Neiderhauser explained, pay a 6.25 percent excise tax to the state — but no local franchise fee.
Meanwhile, cable subscribers pay a 3.75 percent excise tax to the state and a franchise fee to their local government. If local franchise tax is 5 percent, a cable customers total tax would be 8.75 percent.
"With this bill, all we're doing is creating a level playing field," Niederhauser said, explaining that under his proposal both cable and satellite subscribers would pay a tax rate of 6.25 percent.
While the bill was intended to bring parity to the taxes paid by the two groups of consumers, the proposal has struck a nerve among satellite subscribers who have been urged by providers to contact lawmakers.
Senate leaders said Monday they had received hundreds of emails from satellite television subscribers. "They were all form letters, but one," said Senate President Michael Waddoups, R-Taylorsville.
Added Majority Assistant Whip Peter Knudson, R-Brigham City, "There's a lot of misunderstanding in the email I got."
A letter emailed to DISH customers encourages them to contact their state senators. It says that the Senate "is about to vote for tax relief — for cable subscribers only."
Niederhauser, the Senate majority whip, said the letter mischaracterizes SB112, which he described as "an equalization type of bill."
"SB112 brings parity and fairness to the taxes people pay as TV customers and will allow them to make decisions based on economic value, competitive rates and product quality rather than applicable tax rates," Niederhauser wrote on the Utah Senate blog.
The Legislature passed legislation about a decade ago to allow local goverments to impose franchise fees up to 5 percent for providers of cable and satellite television. But under subsequent federal law, satellite companies were exempted from local franchise taxes, which means cable customers were paying higher tax rates.
To help address that inequity, the Legislature gave cable customers a 50 percent tax credit for local franchise fees they pay. Under SB112, the entire franchise fee would be offset, saving cable customer $3 to $4 a month.
The bill is up for final passage in the Senate.