Reports indicate that a ruling has been made by the appeals court in South Carolina to the effect that DirecTV, a pay-television firm, owes the Palmetto State close to $15 million in taxes. According to the judges DirecTV’s returns were revised and the result was that the amount of money that had been collected from customers was understated for several years. The decision of the judges of the appeals court upheld a ruling by a lower court that had been made two years ago.
According to business registration fillings, DirecTV expanded to the Palmetto State in 1995 but the tax dispute with the state started around 2006. The period between 2006 and 2008 is at the heart of the dispute after the pay television firm filed tax returns but then sought to revise them after which it started demanding a refund.
Initially DirecTV had reported that its taxable income was from two major sources namely the revenues earning from selling equipment including set top boxes as well as leasing. DirecTV also earned revenues from the monthly fees it charged its subscribers in South Carolina. These figures were combined and the sum divided and the tax due amounted to about 2% of the net income ratio.
“As a result of the audit, the department accepted DirectTV’s original 2006 through 2008 corporate income tax returns as filed,” wrote the appeals court.
Afterwards DirecTV decided amending the filings was necessary on the grounds that subscription revenue had been incorrectly apportioned to South Carolina. With this revision DirecTV stood to benefit from a reduction in tax exposure saving the pay television firm close to $6 million. Consequently after the revision DirecTV sought a refund from the Palmetto State.
The revenue department however declined DirecTV’s request and did not return the money saying in an audit report that was released in November 2011 that it did not accept the amended returns. In tax forms for the period between 2009 and 2011, the subscription fees were left out in DirecTV’s tax forms forcing South Carolina to push back. Consequently DirecTV formally appealed though the courts ruled in the state’s favor including in the latest case.
This setback for the AT&T-owned DirecTV in South Carolina comes at a time when the pay television firm is in the process of launching a cloud DVR service like all its major rivals. Currently the feature, which will have a video content storage capacity of about 100 hours, is being tested.