          Supreme Court of Florida
                                   ____________

                                   No. SC15-1249
                                   ____________

               FLORIDA DEPARTMENT OF REVENUE, et al.,
                            Appellants,

                                          vs.

                            DIRECTV, INC., etc., et al.,
                                  Appellees.

                                   [April 13, 2017]

QUINCE, J.

      This case is before the Court on appeal from the decision of the First District

Court of Appeal in DIRECTV, Inc. v. State, Department of Revenue, 40 Fla. L.

Weekly D1375 (Fla. 1st DCA June 11, 2015), where the district court expressly

declared a state statute invalid. We have jurisdiction to review the decision. See

art. V, § 3(b)(1), Fla. Const. Because we find that the statute involved does not

violate the dormant Commerce Clause, we reverse the decision of the First District.

                    FACTS AND PROCEDURAL HISTORY

       In 2005, DIRECTV, Inc. and Echostar, L.L.C. (the satellite companies)

filed suit in the trial court, “seeking a declaratory judgment holding the sales tax
provision in the [Communications Services Tax] unconstitutional, a permanent

injunction against the enforcement of the provision, and a refund of the taxes paid

pursuant to the provision.” DIRECTV, Inc., 40 Fla. L. Weekly at D1375. Enacted

in 2001, the Communications Services Tax (CST) imposed a 6.8 percent tax rate

on cable service and a 10.8 percent tax rate on satellite service. § 202.12(1), Fla.

Stat. (2005). Presently, cable service is taxed at 4.92 percent and satellite is taxed

at 9.07 percent. § 202.12(1), Fla. Stat. (2015). It is this difference, according to

the satellite companies, that violates the dormant Commerce Clause. The trial

court disagreed, and “[i]n ruling on cross-motions for summary judgment,” found

that section 202.12(1), Florida Statutes, does not violate the Commerce Clause

“because it does not benefit in-state economic interests or similarly situated

entities.” Id.

      The satellite companies appealed the decision to the First District, arguing

that the statute unconstitutionally discriminates against interstate commerce in both

its effect and purpose. Id. The First District agreed with the satellite companies

and reversed the decision of the trial court. Id. at D1378-79. The district court

noted that satellite companies and cable companies were similarly situated because

they both “operate in the same market and are direct competitors within that

market.” Id. at D1376. Moreover, the district court found cable companies to be

in-state interests due to their local infrastructure and local employment. Id. at


                                         -2-
D1377. The district court held that “because the CST favors communications that

use local infrastructure, it has a discriminatory effect on interstate commerce.” Id.

However, the court did not find that the statute was discriminatory in its purpose.

Id. at D1378-79.

      Now before this Court, Appellants Florida Department of Revenue and the

Florida Cable Telecommunications Association, Inc. (FCTA) argue that section

202.12(1) of the CST does not discriminate in its effect or its purpose and the

satellite companies are not entitled to a refund for the taxes paid. This Court

reviews decisions evaluating a statute’s constitutionality de novo. Fla. Dept. of

Revenue v. City of Gainesville, 918 So. 2d 250, 256 (Fla. 2005). All statutes come

“clothed in a presumption of constitutionality,” and this Court will invalidate a

statute only if a challenger has shown its invalidity “beyond reasonable doubt.”

Crist v. Fla. Ass’n of Criminal Def. Lawyers, Inc., 978 So. 2d 134, 139 (Fla. 2008).

                                    ANALYSIS

      The statute at issue in this case, section 202.12(1) of the Communications

Services Tax Simplification Law, states in relevant part:

             The Legislature finds that every person who engages in the
      business of selling communications services at retail in this state is
      exercising a taxable privilege. It is the intent of the Legislature that
      the tax imposed by chapter 203 be administered as provided in this
      chapter.

            (1) For the exercise of such privilege, a tax is levied on each
      taxable transaction, and the tax is due and payable as follows:

                                         -3-
            (a) Except as otherwise provided in this subsection, at a rate of
      6.8 percent applied to the sales price of the communications service
      which:
            1. Originates and terminates in this state, or
            2. Originates or terminates in this state and is charged to a
      service address in this state,

      when sold at retail, computed on each taxable sale for the purpose of
      remitting the tax due. . . .

             ....

             (c) At the rate of 10.8 percent on the retail sales price of any
      direct-to-home satellite service received in this state.

§ 202.12(1), Fla. Stat. (2005). The satellite companies contend that section

202.12(1) is facially unconstitutional. They argue that the text of the statute shows

it was enacted with a discriminatory purpose and has a discriminatory effect, which

violates the dormant Commerce Clause. “A facial challenge to a legislative Act

is . . . the most difficult challenge to mount successfully, since the challenger must

establish that no set of circumstances exist under which the Act would be valid.”

United States v. Salerno, 481 U.S. 739, 745 (1987).

                                 Commerce Clause

      The Commerce Clause authorizes Congress to “regulate Commerce with

foreign Nations, and among the several States.” Article I, § 8, cl. 3, U.S. Const.

The Supreme Court recognizes, in addition to the text’s affirmative grant of

authority, a further, negative command, known as the dormant Commerce Clause.



                                         -4-
This clause prohibits certain state taxation even when Congress has failed to

legislate on the subject. Okla. Tax Comm’n v. Jefferson Lines, Inc., 514 U.S. 175,

179 (1995). A state tax is permissible under the dormant Commerce Clause only if

it “[1] is applied to an activity with a substantial nexus with the taxing State, [2] is

fairly apportioned, [3] does not discriminate against interstate commerce, and [4] is

fairly related to the services provided by the State.” Complete Auto Transit, Inc. v.

Brady, 430 U.S. 274, 279 (1977). The satellite companies’ challenge to the CST is

limited to the third prong, namely the prohibition on discrimination against

interstate commerce.

      “[S]tatutes that openly discriminate against out-of-state economic interests

in order to protect in-state interests are subject to a per se rule of invalidity.”

Simmons v. State, 944 So. 2d 317, 330 (Fla. 2006). A statute can discriminate

against out-of-state interests in one of three ways: (1) it may be facially

discriminatory; (2) it may discriminate in its practical effect; or (3) it may have a

discriminatory intent. Amerada Hess Corp. v. Dir., Div. of Taxation, 490 U.S. 66,

75 (1989). In this case, the satellite companies argue that the sales tax portion of

the CST discriminates in its effect and purpose.

                               I. Discriminatory Effect

      A state law is discriminatory in effect if it affects similarly situated entities

in a market by imposing disproportionate burdens on out-of-state interests and


                                           -5-
conferring advantages upon in-state interests. Or. Waste Sys., Inc. v. Dep’t of

Envtl. Quality, 511 U.S. 93, 99 (1994). Appellants argue Appellees’

discriminatory effect argument fails at the threshold level. According to

Appellants, this Court does not need to examine whether the tax imposes

disproportionate burdens because satellite and cable companies are not similarly

situated.

                           Substantially Similar Entities

      Appellant Department of Revenue argues that cable companies and satellite

companies are not similarly situated entities. “[A]ny notion of discrimination

assumes a comparison of substantially similar entities.” Gen. Motors Corp. v.

Tracy, 519 U.S. 278, 298 (1997) (footnote omitted). If the differences between the

two companies render the entities not substantially similar, the Commerce Clause

is not implicated. See id. Appellant contends that cable and satellite providers

offer different communications services using different technologies and are

subject to different regulatory burdens. In response, Appellees argue that cable

and satellite providers compete directly and offer virtually identical products, and

consumers view their products as similar and substitutable.

      What is required for entities to be considered “substantially similar” has not

been extensively considered by the courts. See Gen. Motors Corp., 519 U.S. at

299 (“[The] central assumption [of substantially similar entities] has more often


                                        -6-
than not itself remained dormant in this Court’s opinions on state discrimination

subject to review under the dormant Commerce Clause . . . .”). It appears that at

the very least, the entities must be in competition with one another. “[I]n the

absence of actual or prospective competition between the supposedly favored and

disfavored entities in a single market there can be no local preference . . . to which

the dormant Commerce Clause may apply.” Id. at 300; see also Alaska v. Arctic

Maid, 366 U.S. 199, 204 (1961) (refusing to compare freezer-ship owners and

local fish processors because “[t]he freezer ships do not compete with those who

freeze fish for the retail market”).

      We find that cable and satellite providers are similarly situated because they

both provide television service and compete directly in the pay-television market

for the same customers. Appellant notes that cable offers Internet and phone

service and satellite does not. While true, both satellite and cable offer television

programming and compete for customers in that market. Appellees’ expert offered

uncontroverted testimony that cable and satellite TV “are economic substitutes,”

such that an increase in the cost of one “will cause consumers, on net, to shift” to

the other—i.e., that consumers see the services as fungible. Moreover, Appellant

FCTA’s president acknowledged in depositions that satellite is cable’s direct

competitor, “an alternative provider of multichannel video and another means for

customers to get that particular product.”


                                         -7-
      Appellant also states that cable is heavily regulated by the federal

government and satellite is not. However, one may argue that because cable

predates satellite by decades, Congress may have decided to limit federal

regulation on what was a burgeoning industry in order to allow it to compete with

cable. See, e.g., DISH Network Corp. v. F.C.C., 653 F.3d 771, 774 (9th Cir. Ct.

2011) (noting Congress passed the Satellite Home Viewer Improvement Act of

1999 “to better enable competition between satellite TV and cable TV”). The

Florida Legislature also appears to view cable and satellite as competitors. In

enacting the CST, the Legislature declared that it wanted to provide a “uniform

method for taxing communications services sold in the state” in order to “free

consumers to choose a provider based on tax-neutral considerations” and “spur[]

new competition by simplifying an extremely complicated state and local tax and

fee system.” § 202.105(1), Fla. Stat. (2001).

      Although Appellant argues that cable and satellite are not similarly situated

because cable offers services that satellite does not and cable is regulated more

heavily, they both compete in the same market for the same customers.

Accordingly, we consider satellite and cable to be similarly situated for the purpose

of the dormant Commerce Clause.




                                        -8-
                                  In-State Interests

       Appellants Department of Revenue and FCTA both argue that cable is not

an in-state interest. The Supreme Court has identified “in-state” and “out-of-state”

businesses based on a distinct geographic connection, or lack thereof, to the home

state. See American Trucking Ass’ns v. Scheiner, 483 U.S. 266, 286 (1987) (“[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.”); see also

Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 28 (1980) (striking down a Florida

statute prohibiting banks “with principal operations outside Florida” from

operating investment subsidiaries or giving investment advice within the state).

Appellants argue that cable and satellite companies are both out-of-state interests

because they each have corporate headquarters and principal places of business

located outside of Florida. Additionally, they each have employees and property in

Florida and elsewhere that facilitate the provision of their services to customers.

Appellees counter that cable companies are in-state interests because they employ

more Florida residents and utilize local infrastructure to produce and distribute

their programming.

      Cable companies are not in-state interests for the purpose of the dormant

Commerce Clause. Instead, we find that both businesses are interstate in nature.

Florida’s largest cable companies, Comcast Corporation, Coxcom, Inc., Cox


                                         -9-
Communications Gulf Coast, LLC, and Bright House Networks, LLC, have their

headquarters in Pennsylvania, Georgia, Georgia, and New York, respectively.

Florida’s largest satellite provider, DIRECTV, has its headquarters in California.

Florida’s second largest satellite provider, DISH, has its headquarters in Colorado.

The cable and satellite companies have employees and property both inside and

outside of Florida to facilitate their operations and earn income. They both employ

Florida residents to sell, maintain, or repair their service to Florida customers.

They also own and lease a significant amount of property in Florida.

      Neither cable nor satellite “produce” anything in Florida. Instead, they are

service providers that acquire video content from national and regional networks

and local broadcasters and distribute that video content to their customers in

Florida. To do this, they both employ the use of ground infrastructure. Cable uses

headends to aggregate video content from the national and regional networks and

process it for further downstream transmission to Florida customers. Satellite uses

local collection facilities to receive off-air video content from local broadcast

stations, encode the content, and prepare it for long-haul transmission back to their

satellite uplink facilities outside of Florida. This local off-air video content is then

transmitted over ground, using leased capacity on fiber or coaxial networks owned

by telecommunications companies in Florida.




                                         - 10 -
         Cable is not a local, in-state interest any more than satellite. While it may be

true that cable employs more Florida residents and uses more local infrastructure to

provide its services, the Supreme Court has never found a company to be an in-

state interest because it had a greater presence in a state. Instead, the Supreme

Court has affirmed the prerogative of state and local governments to treat different

business models differently. See Amerada Hess, 490 U.S. 66; Minnesota v. Clover

Leaf Creamery Co., 449 U.S. 456 (1981); Exxon Corp. v. Governor of Md., 437

U.S. 117 (1978). According to these cases, a state may treat “two categories of

companies” differently so long as the discrimination is based on “differences

between the nature of their businesses” and not “the location of their activities.”

Amerada Hess, 490 U.S. at 78. Here, the difference between cable and satellite is

not that one is located or primarily operates “in-state” and the other “out-of-state.”

Instead, it is that their different business models have a different impact on local

communities. While cable’s business model requires the employment of more

people and the use of more infrastructure, it is not a local business. Neither cable

nor satellite is produced in Florida, and neither business is headquartered in the

state.

         For these reasons, we do not consider cable an in-state interest for the

purpose of the dormant Commerce Clause. Because we find that cable is not an in-

state interest, the satellite companies’ discriminatory effect argument fails. To


                                          - 11 -
date, every state and federal court considering Commerce Clause challenges

brought by the satellite industry arguing against state tax measures as favoring the

cable industry has held that these taxes do not violate the dormant Commerce

Clause. They have found either that cable and satellite are not similarly situated1

or that cable is not an in-state interest.2 We agree with those decisions that find

cable is not an in-state interest.

                              II. Discriminatory Purpose

       A state law may also violate the dormant Commerce Clause if it has a

discriminatory purpose. See Hunt v. Wash. State Apple Advertising Comm’n, 432

U.S. 333, 352-53 (1977). To determine discriminatory purpose, courts look to the

language and the legislative history of the statute in question. See Bacchus



      1. DIRECTV, Inc. v. Treesh, 487 F.3d 471, 480 (6th Cir. 2007) (finding that
cable and satellite “are distinct, consisting of two very different means of
delivering broadcasts”); DIRECTV, LLC v. Dep’t of Revenue, 25 N.E.3d 258,
266-71 (Mass. 2012) (concluding that cable and satellite are not substantially
similar for Commerce Clause purposes); DIRECTV, Inc. v. Roberts, 477 S.W.3d
293, 307 (Tenn. Ct. App. 2015) (determining that cable and satellite providers are
not “substantially similar entities for purposes of the Commerce Clause”).

       2. DIRECTV, Inc. v. State, 632 S.E.2d 543, 548 (N.C. Ct. App. 2006)
(holding that cable providers are not “local” as compared to satellite providers);
DIRECTV Inc. v. Levin, 941 N.E.2d 1187, 1196 (Ohio 2010) (explaining that “the
cable industry is not a local interest benefited at the expense of out-of-state
competitors”), cert. denied, DIRECTV Inc. v. Testa, 133 S. Ct. 51 (2012);
DIRECTV v. Utah State Tax Comm’n, 364 P.3d 1036, 1046-47 (Utah 2015)
(finding that cable providers are not “in-state” and satellite providers are not “out-
of-state” for Commerce Clause purposes).

                                        - 12 -
Imports, Ltd. v. Dias, 468 U.S. 263, 270-72 (1984). Appellees argue that affidavits

from lobbyists and two former legislators, which stated that the cable lobbyists

sought a differential tax rate for cable and satellite because satellite was beginning

to take over market share, demonstrate that the Legislature acted with a

discriminatory purpose. Moreover, they claim that the Supreme Court has made

clear that courts can and must consult a broad range of evidence—including

statements by proponents and sponsors of suspect legislation—to unmask the true

purpose for an alleged discriminatory enactment.

      A general rule of statutory construction is that “legislative intent is

determined from the statute’s text.” Heart of Adoptions, Inc, v. J.A., 963 So. 2d

189, 198 (Fla. 2007). In this case, section 202.105, Florida Statutes, provides the

legislative intent of the CST:

             (1) It is declared to be a specific legislative finding that the
      creation of this chapter fulfills important state interests by reforming
      the tax laws to provide a fair, efficient, and uniform method for taxing
      communications services sold in this state. This chapter is essential to
      the continued economic vitality of this increasingly important industry
      because it restructures state and local taxes and fees to account for the
      impact of federal legislation, industry deregulation, and the
      convergence of service offerings that is now taking place among
      providers. This chapter promotes the increased competition that
      accompanies deregulation by embracing a competitively neutral tax
      policy that will free consumers to choose a provider based on tax-
      neutral considerations. This chapter further spurs new competition by
      simplifying an extremely complicated state and local tax and fee
      system. Simplification will lower the cost of collecting taxes and
      fees, increase service availability, and place downward pressure on
      price. Newfound administrative efficiency is demonstrated by a

                                        - 13 -
      reduction in the number of returns that a provider must file each
      month. By restructuring separate taxes and fees into a revenue-neutral
      communications services tax centrally administered by the
      department, this chapter will ensure that the growth of the industry is
      unimpaired by excessive governmental regulation. The tax imposed
      pursuant to this chapter is a replacement for taxes and fees previously
      imposed and is not a new tax. The taxes imposed and administered
      pursuant to this chapter are of general application and are imposed in
      a uniform, consistent, and nondiscriminatory manner.

§ 202.105, Fla. Stat. (2001). There is no evidence from the text of the statute that

it was enacted with a discriminatory purpose. As noted by the First District, an

examination of the 2000 Senate and House Journals reveals that there was no intent

to favor cable companies. DIRECTV, Inc., 40 Fla. L. Weekly at D1378.

Moreover, the 2000 Senate Staff Analysis and Economic Impact Statement shows

that analysts believed the CST’s impact would have the benefit of a simplified tax

structure for all communication providers. Id.

      Appellees argue that courts can and must consider other forms of evidence,

such as the affidavits presented in this case. However, the Supreme Court has held

that legislative history is far more problematic when sources outside of the

Legislature are consulted, or when courts “speculate upon the significance of the

fact that a certain interest group sponsored or opposed particular legislation.”

Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 120 (2001); see also Kelly v.

Robinson, 479 U.S. 36, 51 n.13 (1986) (“[N]one of those statements was made by




                                        - 14 -
a Member of Congress, nor were they included in the official Senate and House

Reports. We decline to accord any significance to those statements.”).

      Therefore, we do not find that the CST was enacted with a discriminatory

purpose. Because the CST is not discriminatory in either its purpose or effect, the

satellite companies’ facial challenge fails. Consequently, Appellees are not

entitled to a refund of the taxes paid pursuant to the statute.

                                   CONCLUSION

      For the reasons set forth above, we reverse the First District’s decision

holding that the statute is invalid. Section 202.12(1) is not discriminatory in either

its purpose or its effect and therefore does not violate the dormant Commerce

Clause.

      It is so ordered.

LABARGA, C.J., and PARIENTE, LEWIS, and CANADY, JJ., concur.
POLSTON, J., concurs in result.
LAWSON, J., did not participate.

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.

An Appeal from the District Court of Appeal – Statutory or Constitutional
Invalidity

      First District - Case Nos. 1D13-5444 & 1D14-292

      (Leon County)

Pamela Jo Bondi, Attorney General, J. Clifton Cox, Special Counsel, and Rachel
Nordby and Jonathan L. Williams, Deputy Solicitors General, Tallahassee, Florida,

                                         - 15 -
      for Appellant Florida Department of Revenue

Eric S. Tresh, Amelia Toy Rudolph, and Zachary T. Atkins of Eversheds
Sutherland (US) LLP, Atlanta, Georgia; David A. Konuch, Tallahassee, Florida;
and Walter Hellerstein, Athens, Georgia,

      for Appellant Florida Cable Telecommunications Association, Inc.

Katherine E. Giddings and Kristen M. Fiore of Akerman LLP, Tallahassee,
Florida; Peter O. Larsen and Timothy J. McDermott of Akerman LLP,
Jacksonville, Florida; E. Joshua Rosenkranz, Jeremy N. Kudon, and Nicholas G.
Green of Orrick, Herrington & Sutcliffe LLP, New York, New York; and Eric A.
Shumsky of Orrick, Herrington & Sutcliffe LLP, Washington, District of
Columbia,

      for Appellees

Gigi Rollini of Messer Caparello, P.A., Tallahassee, Florida,

      for Amicus Curiae Public Knowledge

John S. Mills, Courtney R. Brewer, and Andrew D. Manko of The Mills Firm,
P.A., Tallahassee, Florida,

      for Amicus Curiae Satellite Broadcasting and Communications Association

John A. Hinman of Hinman Carmichael LLP, San Francisco, California; and
Christine Davis Graves of Carlton Fields Jorden Burt, P.A., Tallahassee, Florida,

      for Amicus Curiae National Association of Wine Retailers




                                       - 16 -
