{ "id": 8379521, "name": "DIRECTV, INC. and ECHOSTAR SATELLITE, L.L.C., Plaintiffs v. STATE OF NORTH CAROLINA, THE NORTH CAROLINA DEPARTMENT OF REVENUE, and E. NORRIS TOLSON, in his official capacity as Secretary of Revenue, Defendants", "name_abbreviation": "DIRECTV, Inc. v. State", "decision_date": "2006-08-01", "docket_number": "No. COA05-1250", "first_page": "659", "last_page": "669", "citations": [ { "type": "official", "cite": "178 N.C. App. 659" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "199 S.E. 405", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1938, "pin_cites": [ { "page": "408", "parenthetical": "holding that an act of the General Assembly will not be held invalid as violative of the Constitution unless it so appears beyond a reasonable doubt" } ], "opinion_index": 0 }, { "cite": "214 N.C. 367", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8630778 ], "year": 1938, "pin_cites": [ { "page": "371", "parenthetical": "holding that an act of the General Assembly will not be held invalid as violative of the Constitution unless it so appears beyond a reasonable doubt" } ], "opinion_index": 0, "case_paths": [ "/nc/214/0367-01" ] }, { "cite": "320 F.3d 200", "category": "reporters:federal", "reporter": "F.3d", "case_ids": [ 9323308 ], "year": 2003, "pin_cites": [ { "parenthetical": "relying on Exxon, the court held that the dormant Commerce Clause prohibits discrimination against the interstate market for retail cigarettes, but not discrimination against retailers in that market who sell cigarettes in a particular manner" } ], "opinion_index": 0, "case_paths": [ "/f3d/320/0200-01" ] }, { "cite": "490 U.S. 66", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 605855 ], "weight": 12, "pin_cites": [ { "page": "79" }, { "page": "71" }, { "page": "78" }, { "page": "70" }, { "page": "78" }, { "page": "70" }, { "page": "78", "parenthetical": "citation omitted" }, { "page": "70", "parenthetical": "citation omitted" } ], "opinion_index": 0, "case_paths": [ "/us/490/0066-01" ] }, { "cite": "486 U.S. 269", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6215556 ], "weight": 2, "year": 1988, "pin_cites": [ { "page": "278", "parenthetical": "citations omitted" }, { "page": "311", "parenthetical": "citations omitted" } ], "opinion_index": 0, "case_paths": [ "/us/486/0269-01" ] }, { "cite": "441 U.S. 322", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 1780381 ], "weight": 2, "year": 1979, "pin_cites": [ { "page": "336" }, { "page": "262" } ], "opinion_index": 0, "case_paths": [ "/us/441/0322-01" ] }, { "cite": "286 U.S. 472", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 3915277 ], "weight": 2, "year": 1932, "pin_cites": [ { "page": "481", "parenthetical": "\"Discrimination ... is a practical conception. We must deal in this matter . . . with substantial distinctions and real injuries.\"" }, { "page": "1239", "parenthetical": "\"Discrimination ... is a practical conception. We must deal in this matter . . . with substantial distinctions and real injuries.\"" } ], "opinion_index": 0, "case_paths": [ "/us/286/0472-01" ] }, { "cite": "511 U.S. 641", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 1147098 ], "weight": 2, "year": 1994, "pin_cites": [ { "page": "654" }, { "page": "651" } ], "opinion_index": 0, "case_paths": [ "/us/511/0641-01" ] }, { "cite": "311 U.S. 454", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6141516 ], "weight": 2, "year": 1940, "pin_cites": [ { "page": "456-57", "parenthetical": "holding that a North Carolina statute that taxed out-of-state retailers for hotel room use was discriminatory in practical effect because it discriminated in favor of intrastate businesses" }, { "page": "278", "parenthetical": "holding that a North Carolina statute that taxed out-of-state retailers for hotel room use was discriminatory in practical effect because it discriminated in favor of intrastate businesses" } ], "opinion_index": 0, "case_paths": [ "/us/311/0454-01" ] }, { "cite": "483 U.S. 266", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 28358 ], "weight": 2, "year": 1987, "pin_cites": [ { "page": "286", "parenthetical": "citation omitted" }, { "page": "244", "parenthetical": "citation omitted" } ], "opinion_index": 0, "case_paths": [ "/us/483/0266-01" ] }, { "cite": "468 U.S. 263", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11337939 ], "weight": 6, "year": 1984, "pin_cites": [ { "page": "265" }, { "page": "205" }, { "page": "273" }, { "page": "211" } ], "opinion_index": 0, "case_paths": [ "/us/468/0263-01" ] }, { "cite": "437 U.S. 117", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6178010 ], "weight": 10, "year": 1978, "pin_cites": [ { "page": "127" }, { "page": "101" }, { "page": "125-26" }, { "page": "100" }, { "page": "126" }, { "page": "100" } ], "opinion_index": 0, "case_paths": [ "/us/437/0117-01" ] }, { "cite": "95 L. Ed. 2d 697", "category": "reporters:federal", "reporter": "L. Ed. 2d", "case_ids": [ 6222105, 1148012 ], "weight": 2, "year": 1987, "pin_cites": [ { "page": "707" } ], "opinion_index": 0, "case_paths": [ "/us/481/0739-01", "/us/341/0001-01" ] }, { "cite": "481 U.S. 739", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6222105 ], "year": 1987, "pin_cites": [ { "page": "745" } ], "opinion_index": 0, "case_paths": [ "/us/481/0739-01" ] }, { "cite": "519 U.S. 278", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11595433 ], "weight": 2, "year": 1997, "pin_cites": [ { "page": "299" }, { "page": "780" } ], "opinion_index": 0, "case_paths": [ "/us/519/0278-01" ] }, { "cite": "466 U.S. 388", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6200366 ], "weight": 2, "year": 1984, "pin_cites": [ { "page": "407", "parenthetical": "holding that a New York income tax provision that expressly provided a tax credit for shipping products from New York rather than other states violated the Commerce Clause" }, { "page": "403", "parenthetical": "holding that a New York income tax provision that expressly provided a tax credit for shipping products from New York rather than other states violated the Commerce Clause" } ], "opinion_index": 0, "case_paths": [ "/us/466/0388-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 105-164.3", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "year": 2003, "pin_cites": [ { "page": "(8)" } ], "opinion_index": 0 }, { "cite": "N.C. Gen. Stat. \u00a7 105-164.4", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 2, "pin_cites": [ { "page": "(a)(6)" }, { "page": "(a)(6)" } ], "opinion_index": 0 }, { "cite": "494 A.2d 775", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1985, "opinion_index": 0 }, { "cite": "100 N.J. 1", "category": "reporters:state", "reporter": "N.J.", "case_ids": [ 1360931 ], "year": 1985, "opinion_index": 0, "case_paths": [ "/nj/100/0001-01" ] }, { "cite": "358 U.S. 450", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 3659482 ], "weight": 2, "year": 1959, "pin_cites": [ { "page": "458" }, { "page": "427" } ], "opinion_index": 0, "case_paths": [ "/us/358/0450-01" ] }, { "cite": "511 U.S. 93", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 1147349 ], "weight": 2, "year": 1994, "pin_cites": [ { "page": "99" }, { "page": "21" } ], "opinion_index": 0, "case_paths": [ "/us/511/0093-01" ] }, { "cite": "544 U.S. 460", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 5881890 ], "weight": 8, "year": 2005, "pin_cites": [ { "page": "472", "parenthetical": "quoting Oregon Waste Systems, Inc. v. Dep't of Envtl. Quality of Ore., 511 U.S. 93, 99, 128 L. Ed. 2d 13, 21 (1994)" }, { "page": "809", "parenthetical": "quoting Oregon Waste Systems, Inc. v. Dep't of Envtl. Quality of Ore., 511 U.S. 93, 99, 128 L. Ed. 2d 13, 21 (1994)" }, { "page": "493" }, { "page": "822" }, { "page": "474-75" }, { "page": "810" } ], "opinion_index": 0, "case_paths": [ "/us/544/0460-01" ] }, { "cite": "504 U.S. 334", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11729096 ], "weight": 2, "year": 1992, "pin_cites": [ { "page": "342", "parenthetical": "internal quotation and citations omitted" }, { "page": "132", "parenthetical": "internal quotation and citations omitted" } ], "opinion_index": 0, "case_paths": [ "/us/504/0334-01" ] }, { "cite": "430 U.S. 274", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 12123142 ], "weight": 2, "year": 1977, "pin_cites": [ { "parenthetical": "citations and internal quotation marks omitted" }, { "parenthetical": "citations and internal quotation marks omitted" } ], "opinion_index": 0, "case_paths": [ "/us/430/0274-01" ] }, { "cite": "303 U.S. 177", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6138632 ], "weight": 2, "year": 1938, "pin_cites": [ { "page": "185" }, { "page": "739" } ], "opinion_index": 0, "case_paths": [ "/us/303/0177-01" ] }, { "cite": "504 U.S. 298", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11728988 ], "weight": 2, "year": 1992, "pin_cites": [ { "page": "309", "parenthetical": "quoting South Carolina State Highway Dep't v. Barnwell Bros., Inc., 303 U.S. 177, 185, 82 L. Ed. 734, 739 (1938)" }, { "page": "104", "parenthetical": "quoting South Carolina State Highway Dep't v. Barnwell Bros., Inc., 303 U.S. 177, 185, 82 L. Ed. 734, 739 (1938)" } ], "opinion_index": 0, "case_paths": [ "/us/504/0298-01" ] } ], "analysis": { "cardinality": 1004, "char_count": 24914, "ocr_confidence": 0.762, "pagerank": { "raw": 1.0038577120124648e-07, "percentile": 0.5396534701443984 }, "sha256": "b0cb568880000b0eab6714c4e4eb354e63d3b0a0829deddab3c68fa6be4ddee1", "simhash": "1:56fb5aab2c78aaee", "word_count": 3905 }, "last_updated": "2023-07-14T17:18:34.747306+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges GEER and STEPHENS concur." ], "parties": [ "DIRECTV, INC. and ECHOSTAR SATELLITE, L.L.C., Plaintiffs v. STATE OF NORTH CAROLINA, THE NORTH CAROLINA DEPARTMENT OF REVENUE, and E. NORRIS TOLSON, in his official capacity as Secretary of Revenue, Defendants" ], "opinions": [ { "text": "WYNN, Judge.\nA tax statute does not violate the Commerce Clause of the United States Constitution when the differential tax treatment of \u201ctwo categories of companies results solely from differences between the nature of their businesses, [and] not from the location of their activities.\u201d In this case, Plaintiffs contend that section 105-164.4(a)(6) of the North Carolina General Statutes, which imposes a sales tax on \u201c[d]irect-to-home satellite service,\u201d but not on cable television service, discriminates against satellite providers and favors cable companies on its face and in its practical effect. Because the differential tax results solely from differences between the nature of the provision of satellite and cable services, and not from the geographical location of the businesses, we affirm the trial court\u2019s grant of summary judgment to the State of North Carolina.\nThe facts pertinent to this appeal indicate that Plaintiffs DIRECTV, Inc. and EchoStar Satellite, L.L.C., provide direct broadcast satellite service to subscribers in North Carolina, as well as to subscribers throughout the nation. To distribute satellite services to their customers, satellite operators beam television programming to receiver \u201cdishes\u201d affixed directly to subscribers\u2019 homes from satellites stationed at fixed altitudes above the earth\u2019s equator. In contrast, cable companies provide television programming to their customers using local distribution facilities. Specifically, cable companies distribute their programming using coaxial or fiber optic cables that are laid across the state in a ground-based network. Notwithstanding these differences in the provision of television programming to their customers, satellite and cable companies utilize satellites at some point to provide service to their subscribers, and both require ground equipment located in North Carolina and outside North Carolina to effect delivery of their programming to North Carolina subscribers.\nBefore 2001, North Carolina\u2019s sales tax did not apply to the retail sale of either satellite or cable service. In 2001, the General Assembly enacted a new law entitled \u201cEqualize Taxation of Satellite TV and Cable TV.\u201d 2001 N.C. Sess. Laws. 424, \u00a7 34.17. This new law, codified in section 105-164.4(a)(6) of the North Carolina General Statutes, amended the tax code to impose a state sales tax on providers of \u201cdirect-to-home satellite service\u201d equal to five percent of the companies\u2019 gross receipts. Thus, section 105-164.4(a)(6) imposed a five percent sales tax on satellite companies, but did not impose a sales tax on cable companies. Since 1 January 2002, the effective date of section 105-164.4(a)(6), Plaintiffs have paid the five percent sales tax, which they recouped from their subscribers in a line item on subscribers\u2019 monthly bills.\nOn 30 September 2003, Plaintiffs filed suit in Superior Court, Wake County, seeking a refund of nearly $30,000,000.00 in sales taxes paid pursuant to section 105-164.4(a)(6). In their complaint, Plaintiffs challenged the constitutionality of section 105-164.4(a)(6) on grounds that it (1) violates the Commerce Clause of the United States Constitution; (2) denies Plaintiffs equal protection of the laws in violation of the Equal Protection Clause of the United States Constitution; and (3) violates the rule of uniform taxation of Article V, Section 2, of the North Carolina Constitution.\nOn 18 January 2005, Plaintiffs moved for summary judgment on the Commerce Clause claim of their complaint, and the State simultaneously cross-moved for summary judgment on Plaintiffs\u2019 Commerce Clause and equal protection claims. On 26 May 2005, the trial court denied Plaintiffs\u2019 motion for summary judgment and granted the State\u2019s cross-motion for summary judgment in its entirety, thereby dismissing Plaintiffs\u2019 complaint. Plaintiffs appeal to this Court contending that section 105-164.4(a)(6) of the North Carolina General Statutes facially discriminates against interstate commerce; and the satellite service tax violates the Commerce Clause in its practical effect.\nI.\nThe United States Constitution expressly grants to Congress the power to \u201cregulate [c]ommerce with foreign [njations, and among the several [s]tates[.]\u201d U.S. Const. art. I, \u00a7 8, cl. 3. \u201c[T]he Commerce Clause is more than an affirmative grant of power; it has a negative sweep as well\u201d in that \u201c \u2018by its own force\u2019 [it] prohibits certain state actions that interfere with interstate commerce.\u201d Quill Corp. v. North Dakota, 504 U.S. 298, 309, 119 L. Ed. 2d 91, 104 (1992) (quoting South Carolina State Highway Dep\u2019t v. Barnwell Bros., Inc., 303 U.S. 177, 185, 82 L. Ed. 734, 739 (1938)). The United States Supreme Court has explained that the \u201cdormant\u201d Commerce Clause means that \u201c[a] State is . . . precluded from taking any action which may fairly be deemed to have the effect of impeding the free flow of trade between States.\u201d Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 278 n.7, 51 L. Ed. 2d 326, 330 n.7 (1977) (citations and internal quotation marks omitted).\nIt is well established that a law is discriminatory if it \u201ctax[es] a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State.\u201d Chemical Waste Mgmt. v. Hunt, 504 U.S. 334, 342, 119 L. Ed. 2d 121, 132 (1992) (internal quotation and citations omitted). \u201cDiscrimination\u201d for purposes of the dormant Commerce Clause is \u201cdifferential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.\u201d Granholm v. Heald, 544 U.S. 460, 472, 161 L. Ed. 2d 796, 809 (2005) (quoting Oregon Waste Systems, Inc. v. Dep\u2019t of Envtl. Quality of Ore., 511 U.S. 93, 99, 128 L. Ed. 2d 13, 21 (1994)). Thus, no state may \u201cimpose a tax which discriminates against interstate commerce ... by providing a direct commercial advantage to local business.\u201d Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 458, 3 L. Ed. 2d 421, 427 (1959), superseded by statute as stated in, Silent Hoist & Crane Co. v. Director, Div. of Taxation, 100 N.J. 1, 10 n.l, 494 A.2d 775, 779 n.1 (1985). There are three ways in which a statute can discriminate against out-of-state interests: (1) it may be facially discriminatory; (2) it may have a discriminatory intent; or (3) it may discriminate in its practical effect. Amerada Hess Corp., 490 U.S. at 75, 104 L. Ed. 2d at 68.\nThe statute at issue in this appeal is section 105.164.4(a)(6) of the North Carolina General Statutes which provides:\n(a) A privilege tax is imposed on a retailer at the following percentage rates of the retailer\u2019s net taxable sales or gross receipts as appropriate. ... (6) The rate of five (5%) applies to the gross receipts derived from providing direct-to-home satellite service to the subscribers in this State. A person engaged in the business of providing direct-to-home satellite service is considered a retailer under this Article.\nN.C. Gen. Stat. \u00a7 105-164.4(a)(6). The statute defines \u201c[d]irect-to-home satellite service\u201d as, \u201c [programming transmitted or broadcast by satellite directly to the subscribers\u2019 premises without the use of ground equipment or distribution equipment, except equipment at the subscribers\u2019 premises or the uplink process to the satellite.\u201d N.C. Gen. Stat. \u00a7 105-164.3(8) (2003).\nOn appeal, Plaintiffs contend that section 105-164.4(a)(6) discriminates against satellite providers and favors cable companies in two ways \u2014 on its face and in its practical effect.\nII.\nPlaintiffs first argue that section 105-164.4(a)(6) of the North Carolina General Statutes facially discriminates against interstate commerce. We disagree.\nA state tax law is facially discriminatory where it (1) explicitly refers to state boundaries or uses other terminology that inherently indicates the tax is based on the in-state or out-of-state location of an activity, see Westinghouse Elec. Corp. v. Tully, 466 U.S. 388, 407, 80 L. Ed. 2d 388, 403 (1984) (holding that a New York income tax provision that expressly provided a tax credit for shipping products from New York rather than other states violated the Commerce Clause); and (2) applies to entities similarly situated for Commerce Clause purposes. Gen. Motors Corp. v. Tracy, 519 U.S. 278, 299, 136 L. Ed. 2d 761, 780 (1997). \u201cA facial challenge to a legislative act is . . . the most difficult challenge to mount successfully.\u201d United States v. Salerno, 481 U.S. 739, 745, 95 L. Ed. 2d 697, 707 (1987). The challenger must establish that \u201cno set of circumstances exists under which [the tax] would be valid.\u201d Id. Moreover, the challenger must demonstrate there is an \u201cexplicit discriminatory design to the tax.\u201d Amerada Hess Corp., 490 U.S. at 76, 104 L. Ed. 2d at 69.\nPlaintiffs contend that section 105-164.4(a)(6) is facially discriminatory because it conditions the applicability of the sales tax upon the in-state or out-of-state location of the programming distribution facilities. However, the plain language of section 105-164.4(a)(6) does not make any geographical distinctions, but merely describes one method of providing television programming services to North Carolina subscribers: the satellite companies\u2019 method, as opposed to the cable companies\u2019 method. The dormant Commerce Clause protects the interstate market for a particular product, but it does not protect \u201cthe particular structure or methods operation in a retail market.\u201d Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 127, 57 L. Ed. 2d 91, 101 (1978).\nPlaintiffs argue that section 105-164.4(a)(6) is analogous to the tax exemption the United States Supreme Court struck down as unconstitutional in Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 82 L. Ed. 2d 200 (1984). In Bacchus, a Hawaii statute exempted okole-hao, a brandy distilled from the root of a shrub indigenous to Hawaii, and pineapple wine from the State\u2019s liquor tax. Id. at 265, 82 L. Ed. 2d at 205. Because the tax exemptions applied only to locally produced beverages, the Bacchus Court concluded that the exemptions clearly had a discriminatory effect on interstate commerce. The Court noted that the legislature exempted okolehao and pineapple wine from the State\u2019s liquor tax to encourage and promote the establishment of a new industry and to help in stimulating the local fruit wine industry. Id. at 273, 82 L. Ed. 2d at 211. Thus, because the exemptions were motivated by an intent to confer a benefit upon local industries not granted to out-of-state industries, the Court held that the exemptions were invalid.\nThe facts in Bacchus are easily distinguished from the facts in this case. Here, section 105-164.4(a)(6) does not discriminate against Plaintiffs in favor of a local industry. Contrary to Plaintiffs\u2019 assertions, cable companies are no more \u201clocal*\u2019 in nature than are satellite companies. Indeed, the record reveals that both businesses are interstate in nature, as they both utilize in-state and out-of-state equipment and facilities in providing service to North Carolina subscribers and both own property within the State of North Carolina. Thus, unlike the products exempted from Hawaii\u2019s liquor tax in Bacchus, neither satellite companies nor cable companies are properly characterized as an in-state or out-of-state economic interest. Moreover, there is no evidence in the record on appeal to suggest that the General Assembly enacted section 105-164.4(a)(6) to encourage and promote the cable industry, which we have already determined is not a local industry.\nAs section 105-164.4(a)(6) merely distinguishes between two methods of providing television service to North Carolina subscribers, and such distinctions are permissible under the Commerce Clause, we conclude section 105-164.4(a)(6) is not facially discriminatory.\nIII.\nPlaintiffs next contend that even if section 105-164.4(a)(6) is not facially discriminatory, the statute discriminates in its practical effect against television providers that use out-of-state delivery facilities in favor of those that use local facilities.\n\u201c[A] state tax that favors in-state business over out-of-state business for no other reason than the location of its business is prohibited by the Commerce Clause.\u201d American Trucking Ass\u2019ns v. Scheiner, 483 U.S. 266, 286, 97 L. Ed. 2d 226, 244 (1987) (citation omitted); see also Best & Co., Inc. v. Maxwell, 311 U.S. 454, 456-57, 85 L. Ed. 275, 278 (1940) (holding that a North Carolina statute that taxed out-of-state retailers for hotel room use was discriminatory in practical effect because it discriminated in favor of intrastate businesses). Only actual, rather than hypothetical, discrimination violates the Commerce Clause. Associated Indus. of Missouri v. Lohman, 511 U.S. 641, 654, 128 L. Ed. 2d 639, 651 (1994); see also Gregg Dyeing Co. v. Query, 286 U.S. 472, 481, 76 L. Ed. 1232, 1239 (1932) (\u201cDiscrimination ... is a practical conception. We must deal in this matter . . . with substantial distinctions and real injuries.\u201d). Plaintiffs bear the initial burden of showing that a statute has a discriminatory effect on interstate commerce. Hughes v. Oklahoma, 441 U.S. 322, 336, 60 L. Ed. 2d 250, 262 (1979). If Plaintiffs meet that burden, the State bears the burden of establishing that the challenged tax \u201cadvances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.\u201d New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 278, 100 L. Ed. 2d 302, 311 (1988) (citations omitted).\nIn determining whether section 105-164.4(a)(6) violates the dormant Commerce Clause in its practical effect, we find the United States Supreme Court\u2019s decisions in Amerada Hess, 490 U.S. 66, 104 L. Ed. 2d 58 and Exxon Corp., 437 U.S. 117, 57 L. Ed. 2d 91, instructive. In Amerada Hess, the United States Supreme Court held that a New Jersey statute that denied oil producers a state tax deduction for the federal \u201cwindfall profit tax\u201d imposed on producers of crude oil did not discriminate against interstate commerce. Amerada Hess, 490 U.S. at 79, 104 L. Ed. 2d at 71. The plaintiffs in that case argued that the deduction denial discriminated against oil producers who market their oil in favor of independent retailers who do not produce oil. Id. at 78, 104 L. Ed. 2d at 70. Because New Jersey did not have any oil refineries, the plaintiffs argued that the state had singled out a business activity \u2014 oil production \u2014 conducted in other jurisdictions for a special tax burden. Id. The Amerada Hess Court held that the statute did not violate interstate commerce, explaining that the oil producing plaintiffs\noperate both in New Jersey and outside New Jersey. Similarly, nonproducing retailers may operate both in New Jersey and outside the State. Whatever different effect the [deduction denial] may have on these two categories of companies results solely from differences between the nature of their businesses, [and] not from the location of their activities.\nId.\nIn Exxon Corp., the United States Supreme Court reviewed a Maryland statute that prohibited oil producers or refiners from operating a retail service station within the state. Exxon Corp., 437 U.S. 117, 57 L. Ed. 2d 91. Under the statute, all major oil companies, including Exxon, had to divest themselves of their retail service stations in the state. Id. at 125-26, 57 L. Ed. 2d at 100. Exxon argued that the statute protected in-state independent dealers in the gas retail market from out-of-state competition. The Court, noting that there were several major interstate marketers of petroleum that owned retail gas stations in Maryland that did not produce or refine gasoline, held that the relevant statute created no barriers, explaining,\n[the statute] does not prohibit the flow of interstate goods, place added costs upon them, or distinguish between in-state and out-of-state companies in the retail market. . . . The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.\nId. at 126, 57 L. Ed. 2d at 100. Thus, in Exxon Corp., the Court determined that the dormant Commerce Clause prohibits discrimination against the interstate market for retail gasoline, but that it does not specifically protect retailers in the interstate market who are oil producers. See also Brown & Williamson Tobacco Corp. v. Pataki, 320 F.3d 200 (2d Cir. 2003) (relying on Exxon, the court held that the dormant Commerce Clause prohibits discrimination against the interstate market for retail cigarettes, but not discrimination against retailers in that market who sell cigarettes in a particular manner).\nIn the case sub judice, the relevant market is the interstate market for multichannel video programming. The relevant retailers are multichannel video programming service providers, including those companies that deliver programming by satellite and those that deliver programming by cable. Based on the United States Supreme Court\u2019s reasoning in Amerada Hess and Exxon Corp., we conclude that the dormant Commerce Clause prohibits discrimination against the interstate marketing for multichannel video programming, but that it does not necessarily prohibit discrimination against programmers in that market who deliver programming by satellite as opposed to cable.\nPlaintiffs argue that their delivery of television programming is inherently out-of-state and, therefore, they are unfairly subjected to the tax imposed upon them in section 105-164.4(a)(6). Specifically, Plaintiffs contend that satellites are by definition placed in outer space and the tax imposed under section 105-164.4(a)(6), therefore, always discriminates against out-of-state businesses. However, the United States Supreme Court rejected a similar argument in Amerada Hess. The Amerada Hess Court specifically noted that the oil producers could not move their oil-producing activities to New Jersey because no oil reserves exist there. Thus, the oil producing gas retailers in Amerada Hess were as inherently out-of-state as Plaintiffs are in this case. Indeed, the Court considered this fact to show that the statute could not have been intended to induce the plaintiffs to move their oil-producing activities to New Jersey because there were no oil reserves in New Jersey. Likewise, section 105-164.4(a)(6) could not have been implemented to induce Plaintiffs to move their provision of satellite services to North Carolina because satellites, by their nature, are inherently out-of-state businesses. Given this fact, \u201cit is difficult to see how [the statute] unconstitutionally discriminates against interstate commerce.\u201d Amerada Hess, 490 U.S. at 78, 104 L. Ed. 2d at 70.\nPlaintiffs\u2019 reliance on Granholm, 544 U.S. 460, 161 L. Ed. 2d 796, is misplaced. In Granholm, the Court struck down a New York statute as violating the Commerce Clause where the statute forbade out-of-state wineries from making direct sales unless they first established a distribution operation in New York. Id. at 493, 161 L. Ed. 2d at 822. The United States Supreme Court concluded that this statute discriminated against interstate commerce because the mandate to build a distribution system in New York was an \u201cadditional step[] that drive[s] up the cost of [out-of-state] wine[,]\u201d that in-state producers did not have to incur. Id. at 474-75, 161 L. Ed. 2d at 810.\nIn the case sub judice, even if Plaintiffs were to establish an instate distribution system for the delivery of satellite programming, they would still be subjected to the tax imposed under section 105-164.4(a)(6) because of the means that they use to deliver its services. Similarly, cable companies that have out-of-state distribution systems for the delivery of cable programming are still exempt from the tax imposed under section 105-164.4(a)(6) because of how they deliver their services. Thus, the geographical location of the business, whether in-state or out-of-state, has nothing to do with whether the business is subjected to the tax imposed under section 105-164.4(a)(6). Unlike the wineries in Granholm, whether a company is subjected to the tax under section 105-164.4(a)(6) depends only upon how companies deliver television programming services to its subscribers, and not whether the delivery of the programming services occurs inside or outside the state of North Carolina.\nPlaintiffs further argue that section 105-164.4(a)(6) assesses a substantial cost disadvantage on satellite operators, and inhibits their ability to compete with cable companies. Specifically, Plaintiffs contend that the tax requires its subscribers to pay $30.00 per year more than cable subscribers. Plaintiffs\u2019 argument is not persuasive.\nThe statute does not require Plaintiffs to recoup the sales tax from its subscribers. Plaintiffs have elected to pay this tax by passing the costs to its subscribers. Moreover, although cable subscribers do not pay $30.00 per year in the sales tax imposed under section 105-164.4(a)(6), cable companies recoup local franchise taxes, which are approximately thirty-dollars per year, from their subscribers that satellite subscribers do not pay. Thus, as the title of the legislation that created section 105-164.4(a)(6) \u2014 \u201cEqualize Taxation of Satellite TV and Cable TV\u201d \u2014 suggests, see 2001 N.C. Sess. Laws. 424, \u00a7 34.17, the imposition of the sales tax on satellite companies has, in fact, equalized the local franchise taxes already imposed on cable companies.\nFinally, the record is void of any evidence that this tax has created an undue burden on interstate commerce. Even after the imposition of the sales tax in 2002, Plaintiffs\u2019 number of subscribers and gross revenues have increased from 2001 to 2003 in North Carolina. Moreover, Plaintiffs\u2019 share of the North Carolina multichannel video programming market has continually increased and has remained higher than their share of the national multichannel video programming market. Therefore, Plaintiffs\u2019 success in this market with the imposition of the sales tax under section 105-164.4(a)(6) defeats any claims that they are being discriminated against in its practical effect. Because Plaintiffs have failed to provide sufficient evidence that the tax discriminates against them in its practical effect; much less evidence so clear that no reasonable doubt can arise, section 105-164.4(a)(6) of the North Carolina General Statutes must be sustained against their constitutional challenge. See E. B. Ficklen Tobacco Co. v. Maxwell, 214 N.C. 367, 371, 199 S.E. 405, 408 (1938) (holding that an act of the General Assembly will not be held invalid as violative of the Constitution unless it so appears beyond a reasonable doubt).\nAffirmed.\nJudges GEER and STEPHENS concur.\n. Amerada Hess Corp. v. Director, Div. of Taxation, New Jersey Dep\u2019t of the Treasury, 490 U.S. 66, 78, 104 L. Ed. 2d 58, 70 (1989) (citation omitted).\n. N.C. Gen. Stat. \u00a7 105-164.4(a)(6) (2003).", "type": "majority", "author": "WYNN, Judge." } ], "attorneys": [ "Smith, Anderson, Blount, Dorsett, Mitchell & Jemigan, L.L.P., by James D. Blount, Jr., Walter R. Rogers, Jr., Christopher G. Smith; and Steptoe & Johnson, by Betty Jo Christian and Mark F. Homing for plaintiff-appellants.", "Attorney General Roy Cooper, by Special Deputy Attorney General Kay Linn Miller Hobart and Assistant Attorney General Michael D. Youth for the State." ], "corrections": "", "head_matter": "DIRECTV, INC. and ECHOSTAR SATELLITE, L.L.C., Plaintiffs v. STATE OF NORTH CAROLINA, THE NORTH CAROLINA DEPARTMENT OF REVENUE, and E. NORRIS TOLSON, in his official capacity as Secretary of Revenue, Defendants\nNo. COA05-1250\n(Filed 1 August 2006)\nTaxation\u2014 satellite service \u2014 sales tax \u2014 commerce clause\nThe statute imposing a state sales tax on providers of \u201cdirect-to-home satellite service\u201d but not on cable television service, N.C.G.S. \u00a7 105-164.4(a)(6), does not violate the Commerce Clause of the United States Constitution either facially or in practical effect because: (1) the differential tax results solely from differences between the nature of the provision of satellite and cable services, and not from the geographical location of the businesses; (2) neither satellite companies nor cable companies are properly characterized as an in-state or out-of-state economic interest; (3) the dormant Commerce Clause prohibits discrimination against the interstate marketing for multichannel video programming, but it does not necessarily prohibit discrimination against programmers in that market who deliver programming by satellite as opposed to cable; (4) the imposition of the sales tax on satellite companies has equalized the local franchise taxes already imposed on cable companies; and (5) the record is devoid of any evidence that this tax has created an undue burden on interstate commerce. U.S. Const, art. I, \u00a7 8, cl. 3.\nAppeal by Plaintiffs from judgment entered 26 May 2005 by Judge Clarence E. Horton, Jr., in Superior Court, Wake County. Heard in the Court of Appeals 9 May 2006.\nSmith, Anderson, Blount, Dorsett, Mitchell & Jemigan, L.L.P., by James D. Blount, Jr., Walter R. Rogers, Jr., Christopher G. Smith; and Steptoe & Johnson, by Betty Jo Christian and Mark F. Homing for plaintiff-appellants.\nAttorney General Roy Cooper, by Special Deputy Attorney General Kay Linn Miller Hobart and Assistant Attorney General Michael D. Youth for the State." }, "file_name": "0659-01", "first_page_order": 691, "last_page_order": 701 }