CBC court case against Saskatchewan becomes test case for transponder tax

The Saskatchewan court of appeal is expected to decide this year whether it will review a 1998 lower court decision that allows the provincial government to tax satellite transponders and earth stations leased to the Canadian Broadcasting Corp. Another win by the government could prompt other provinces to introduce a similar tax on all broadcasters who use satellite capacity. Michel Coderre, lawyer for the CBC, is expecting to go to court again sometime this summer. "We’re still waiting for the appeal book by province, which has not yet been filed. I’ve been told that it will be filed with a view to a hearing, hopefully before the summer," he said. The CBC, which has been battling the tax for years, worries the cash grab could even extend beyond Canada’s borders. "We’re concerned to a certain degree that if one province taxes us on our satellite facilities, another province or even an American jurisdiction could. That could lead to double taxation because satellites basically cover North America," says Normand Nault, CBC’s senior manager of technical policy and planning, whose been working on this file for several years. "It’s one thing that one province is taxing us, but imagine if all the provinces taxed us." British Columbia has a similar tax, but it is being applied on a voluntary basis at the moment. "B.C. has a tax in their legislation. But it’s a self-imposed tax and we have decided we are not taxable. The way their law is written is a bit different," says Nault. Saskatchewan has so far won two challenges against the tax, which would be applied under the province’s Education and Health Tax Act (EHTA). In May 1997, responding to a CBC appeal, the Board of Revenue Commission upheld Saskatchewan’s assessment of taxes and penalties to the broadcaster. The province had assessed the CBC $150,000 for the period covering 1992-95. A subsequent appeal, this time to the provincial court, ended with a second ruling in the government’s favour. In a July 10, 1998 decision, a Regina court held that, "the appeals by the CBC and Telesat are dismissed with costs." The CBC is now awaiting word from the Saskatchewan Court of Appeal on its leave to appeal. The government says its EHTA gives it the right to tax telecommunication service within the province, or telecommunication service between one or more points within the province or more points outside the province where the charges for the service are paid by someone residing in the province. The act defines a "telecommunication service" as "any transmission, reception or distribution of signs, signals, words, writing, images, symbols, sounds or intelligence of any nature by means of electromagnetic waves and includes the provision of facilities required for such transmission, reception or distribution." Nault says one of the CBC issues is the Saskatchewan government’s interpretation of what constitutes a telecommunication service. It also questions whether a provincial government has the jurisdictional authority to tax transponders. "We have been challenging the province on how do you have jurisdiction over something that is up in space? Other provinces do not tax satellite transponders. They tax things that are identified with their jurisdiction," says Nault. However, the Regina court ruled that the "CBC acknowledges that it both received and transmitted signals from the earth station facility located within the province at Qu’Appelle. This, in my view, establishes that the CBC received a taxable service in accordance with s. 3 (1)(k)(ii) of the EHTA," wrote the judge in the case. How the tax is calculated The tax stems from a provincial audit. According to the audit, CBC is required to pay $150,264.77 on communications services for the period of January 1, 1992 to February 28, 1995. It also tacked on a charge of $13,222.50 on goods for own use and $1,867.50 in disallowed commissions. The provincial government and CBC have cleared up the matter of tax on goods for own use and disallowed commissions, but the tax on communications services continues its slow process through the courts. The taxes levied on the CBC over the three-year period have varied from 7 per cent to 9 per cent. The tax on the earth station was calculated by multiplying the monthly cost of leasing the facility ($21,102) from Telesat Canada by the tax rate to determine the tax owed by month. Assessing the tax on the transponders was a bit more complicated. The CBC had contracted Telesat for nine channels, of which five could be received in Saskatchewan – four over-the-air with the fifth being the specialty channel Newsworld. It cost the CBC $152,291 per transponder for these channels. The Saskatchewan government based the tax on the satellite capacity by taking the cost of leasing a transponder ($152,291), multiplying it by the number of transponders servicing the province (five) and multiplying that amount by the tax rate (varied from .07 to .09). It then took that number and multiplied it by Saskatchewan’s percentage of Canada’s population at the time of the last census (.0346) for an amount of just over $1,800 in taxes per month.

CBC court case against Saskatchewan becomes test case for transponder tax

Broadcast | April 11, 2001

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