Reducing the Communications Services Tax Would Provide Relief to Virtually All Florida Families and Businesses; Florida’s High Tax Rate is Punitive, Distortionary, and Non-Competitive
Since the enactment of the Communications Services Tax (CST) Simplification Act in 2001, Florida TaxWatch has released several reports recommending that the Legislature reduce this burdensome and highly regressive tax on consumers. Florida’s CST is very high, relative to both other states and the sales tax on the purchase of other goods. This high rate makes the tax punitive and distortionary, and makes the state less competitive than other states, including the potential for reducing investment in broadband network infrastructure.
The Legislature reduced the tax in 2015, but Florida’s rate is still among the highest in the nation. There is currently legislation moving in both chambers (SB 1000 and HB 693) to reduce the rate by one percentage point.
Florida’s CST is levied on cell and landline phone services, cable and satellite television, video and music streaming, landline phone service, and other services. There is a partial exemption for residential household landline phone service. There are state and local option components to the CST, so tax rates vary across the state. The state CST rate is comprised of both a sales tax (4.92 percent) and a gross receipts tax (2.52 percent). Local taxes vary among jurisdictions, ranging from 0.3 percent to 7.6 percent, with median rate of 5.72 percent.
This puts the top CST rate in Florida at more than 15 percent and the median rate at 13.16 percent, nearly twice as high as the median combined state and local sales tax rate (7 percent) in Florida. When the federal Universal Service Fund (USF) charge of 6.44 percent charged on wireless phone service is included, the tax applied to Floridians’ cell phone bill can exceed 21 percent.
The Tax Foundation annually tracks tax rates on wireless phone services across the country. Its latest report shows that Florida still has one of the highest tax rates in the country. According to the report, Florida’s average wireless tax rate (combined state, local and federal) of 21.44 percent ranks 9th highest in the nation.