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The Communication Services Tax Simplification Law has meant confusion to some.
By BRYAN GILMER
© St. Petersburg Times, published November 7, 2001
South Pasadena resident Hal Leigh has heard state lawmakers say the new communication services tax is not a tax increase, just a simpler way of collecting taxes that should bring in the same amount of money to state and local governments.
When the 64-year-old opened his October bill for Time Warner cable TV, he discovered that the "not a tax increase" had increased the tax on his bill from $3.64 to $5.63.
When the law took effect Oct. 1, satellite television customers also noticed a big jump, from 6 percent to 13.17 percent overall.
Leigh's bewilderment results from the "Communication Services Tax Simplification Law," a big change in taxation that is confusing many Florida consumers as they open their TV and phone bills.
Leigh wonders: With taxes on many services going up, will this really just bring government the same money as before?
The Department of Revenue and others repeat that the Legislature intended the answer to be yes. If so, certain customers must be saving enough on taxes to offset those increases. But tax experts say determining the winners and losers is complicated.
Some tax rates are indeed dropping.
State tax rates on business phone service decreased from about 9.5 percent to 9.17 percent, and local tax in Florida cities typically dropped a percentage point or two as well. In St. Petersburg, for instance, local taxes totaling 9 percent were replaced with a 6.72 percent local tax. In Tampa, local taxes fell a similar amount.
But in places outside major cities with no public service tax, rates on business phones have risen. And large call centers, which previously had their state tax bills capped at $50,000 per year, now must pay up to $100,000 per year, notes telecommunications law specialist Bill Townsend, a partner with Holland and Knight.
Even experts like Townsend aren't sure whether businesses must begin paying the new state and local tax rates on the operating costs of their in-house phone systems, called private branch exchanges.
If so, Townsend says, that would be a big tax increase for large businesses, which would have to register their systems and figure out the tax. Attorneys could argue whether the law applies, which could become a messy court fight.
Local governments were supposed to set the local communications rate to reap the same amount of tax money as before. To ensure they didn't lose any money, however, some local governments may have erred on the high side.
"What I understand happened is the local governments all wanted to go to the max rate, and it seems to me if you go to the max rate that is more money than you were getting before," Townsend said.
Governments are required to analyze whether they're collecting more or less after December, and they are supposed to lower the rate if too much money is coming in.
Leigh's local government, South Pasadena, replaced a 3 percent franchise fee and local-option sales tax with a 6.72 percent local communications tax rate, which largely explains his increase.
City finance director Jim Graham said the city simply adopted the rate the state Department of Revenue suggested to bring in the same revenue. That lowered phone bill taxes.
A northern Pinellas County resident, by contrast, saw the tax on a basic cable bill of $20.95 drop 25 cents because the county replaced a 5 percent franchise fee and local option sales tax with a 2.72 percent local rate, offsetting the state tax increase. The tax on phone bills there crept up, overall.
Susan Langston of the Florida Telecommunications Industry Association said the legislation was intended to tax similar services at similar rates -- and to make collecting taxes and turning them in to governments easier on the telecom companies.
Those benefits don't help customers like Leigh. He says it's not the extra tax he'll pay that bothers him, but that legislators don't acknowledge that for him, the new law is a tax increase.
"This is two bucks a month," he said. "It's not something I'm going to go crazy over. The only thing I resent is that I'm treated like a buffoon."
What changed
Several taxes on your TV and phone bills were replaced Oct. 1 with two new ones: "State Communications Service Tax" and "Local Communications Service Tax."
The effect
Cable TV: Taxes rise or stay about the same, depending on where you live. State tax on cable TV rises, but local tax rises or falls by location. Cable Internet access is no longer taxed.
Satellite TV: Tax on service more than doubles from 6 to 13.17 percent.
Residential phone, business phone and wireless phone: It depends. The tax rate on local and long-distance service decreases in cities like Tampa, Clearwater and St. Petersburg that used to impose a public service tax. It rises in places that didn't, like unincorporated Pinellas and Hillsborough counties and some small cities. In places where long-distance calls were not taxed, they will be now.