Florida Ponders Communication Tax on LANs

victor_the_cleaner writes "Here in Florida, a little known tax provision may lead to LANs being taxed. According to the article, 'The provision was intended to make sure companies operating their own land line communication systems, which two decades ago was limited to large utilities and railroads, were paying the same taxes paid by those who rely on commercial phone carriers. About 10 companies (in Florida) pay more than $1.2 million annually based on that definition. However, the statute is so broadly worded that it could be interpreted to describe a local area network.' Internal auditors at the city of Tampa noticed a couple of years ago that the substitute communications service provision was still there and asked state officials why it wasn't being enforced. And now people like Sharon Fox, the city of Tampa's tax revenue coordinator are pushing for enforcement."

SITE GOIN DOWN FASTR THN RICHARD SIMMONS ON A POLE

[Anonymous Coward]

Overlooked Tax Provision Gets Attention
By DAVID WASSON [e-mail]
Published: Apr 15, 2004

TALLAHASSEE - At the urging of Tampa and a handful of other cities, a nearly forgotten provision in Florida's tax code is being dusted off by the state Revenue Department and could lead to the nation's first communications tax on multiuser computer networks.
Business lobbyists and others are scrambling to block the move, which some predict could trigger one of the largest tax increases in Florida history unless lawmakers eliminate the provision or halt its enforcement before adjourning April 30.

``This is a true example of the law of unintended consequences,'' said state Rep. John Stargel, R-Lakeland, who has introduced a bill that would abolish the 1985 provision but has been unable to get it past its first committee stop. ``This is a poster child for bad tax policy.''

The provision was intended to make sure companies operating their own land line communication systems, which two decades ago was limited to large utilities and railroads, were paying the same taxes paid by those who rely on commercial phone carriers. About 10 companies pay more than $1.2 million annually based on that definition.

However, the statute is so broadly worded that it could be interpreted to describe a local area network, which in computer lingo is known as a LAN. Thousands of Florida companies as well as a growing number of private homes have LAN computer systems.

Finding A Solution

Senate leaders oppose such a broad application of the provision but are leery of hastily eliminating it, in part because it would abolish the $1.2 million in tax revenue that has been paid under what is known as the Substitute Communications Services Tax.

The upper legislative chamber is expected to propose a temporary suspension of its enforcement and then look for ways to limit the provision's application without undermining its original intent.

``Back in 1985, there might have been a few engineers at Bell Laboratories who might have understood what a local area network was but not many others,'' said state Revenue Department spokesman Dave Bruns. ``That was essentially pre-Internet.''

Complicating matters is that lawmakers kept the provision intact when they revamped communication services taxes in 2000 as part of an effort to simplify and modernize the tax code. That's what sparked the current problem.

Cities Seek Enforcement

Internal auditors at the city of Tampa noticed a couple of years ago that the substitute communications service provision was still there and asked state officials why it wasn't being enforced.

Cities and counties get a hefty cut of the $2.1 billion in communications taxes collected by phone companies each year. A portion of the money also is earmarked for school construction.

No one knows exactly how much more would be collected by enforcing the broader definition of the tax. The rate varies statewide, ranging from 9.17 percent to 18.07 percent depending on local option assessments.

Stargel predicts it would be hundreds of millions of dollars annually, while some business lobbyists say it would easily exceed $1 billion.

Bruns said that while no one at the state agency believes the provision was ever intended to apply to computer networks, the agency's job is to enforce the policies created by the Legislature. He said the agency asked the Legislature to re-examine the provision last year but lawmakers adjourned without touching it.

With cities continuing to push for collection, the Revenue Department drafted a proposed enforcement rule but delayed implementation until after this year's legislative session to give lawmakers a second chance to amend or abolish the provision. With barely two weeks remaining, bills in the House and Senate are essentially stalled in committees.

``We are awaiting guidance from the Legislature,'' Bruns said.

Among those pushing the issue is Sharon Fox, the city o

Re:Dupe?

[Neil Blender]

Isn't this a dupe? I am sure I read about this before on Slashdot. Can anyone find the post?


link [slashdot.org]

Very old stuff

[gnuyarlathotep]

They have been talking about doing this in Florida for over six years. As soon as the idea hits someone with a braincell (Granted that often takes a while.) it dies each time.

Re:Home enforcement?

[Unnngh!]

Then again...

This [slashdot.org] is from last year when Florida was pushing to pass new legislation to tax LANs.

I think someone (read the revenue service) may have an agenda...

Longest dupe I can remember

[Omega Hacker]

From August 25th, 2003 [slashdot.org]

Support the libertarians .

[Thinkit4]

While most of us are already libertarians, it is an unkown to the mainstream. On this tax day, remember the libertarian party. They were instrumental in repealing a massive tax hike here in Oregon.

The Offending Statute

[MajroMax]

The article was unclear of the exact law involved here. Searching through the Florida statutes gave me this:

202.15 [flsenate.gov] Special rule for users of substitute communications systems.--Any person who purchases, installs, rents, or leases a substitute communications system must register with the department and pay the taxes imposed or administered pursuant to s. 202.12 annually pursuant to rules prescribed by the department.

and

202.11 [flsenate.gov] Definitions.--As used in this chapter:
...
(16) "Substitute communications system" means any telephone system, or other system capable of providing communications services, which a person purchases, installs, rents, or leases for his or her own use to provide himself or herself with services used as a substitute for any switched service or dedicated facility by which a dealer of communications services provides a communication path.

Section 12 [flsenate.gov] says that the tax rate is 6.8% of the sales price, applied yearly.

Re:How long do you think this'll last?

[Migrant Programmer]

what next, a tax for using a remote control to change channels as opposed to standing up and doing it physically?

You don't live in the UK, do you?

Re:Not again...

[frdmfghtr]

It's Florida, what did you expect?

Nothing like England

[fiannaFailMan]

You're right. It IS a completely different beast. The British TV license fee is a price well worth paying for the best public service broadcasting in the world. There's no comparison whatsoever between this and what is obviously a case of a bit of state law falling behind the times as technology marches on.

Re:Longest dupe I can remember

[cbreaker]

As someone said way up above where you apparently did not read, THAT article was about a NEW tax, this one is about enforcing an EXISTING tax.

Your post is the dupe, not the article.

They should read the law, as I have

[DaveV1.0]

I live in Tampa and read the law. This is what I found to be important:

(3) "Communications services" means the transmission, conveyance, or routing ... The term does not include:

(a) Information services.
...
(h) Internet access service, electronic mail service, electronic bulletin board service, or similar on-line computer services.

And

(7) "Information service" means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, using, or making available information via communications services, including, but not limited to, electronic publishing, web-hosting service, and end-user 900 number service.

And

(16) "Substitute communications system" means any telephone system, or other system capable of providing communications services, which a person purchases, installs, rents, or leases for his or her own use to provide himself or herself with services used as a substitute for any switched service or dedicated facility by which a dealer of communications services provides a communication path.

IANAL, but the way I read this, computer networks can not be "Substitute communications system" because "communications services" does not include "Information services", "Internet access service", "similar on-line computer services".

This is just another instance of government officials not understanding the technology they are trying to tax, regulate, and legislate.

Lack of personal income tax!

[mabhatter654]

It's the lack of personal income tax to blame. They're expecting to fund the state off the tourists...but with the economic downturn not many people are vacationing...hence the need for "chicken" taxes...similar to the old days when the Noble used to charge taxes "just because". They're poor and have to keep inventing stuff to tax so they create taxes on phones, merchandizing fixtures, and other stuff that business primarily have so the serfs don't have to be bothered with paying their own way. It's cheap for seniors, but the only jobs for working folk are all low wage "tourist" jobs.

Re:justification

[Idarubicin]

Or maybe I could interest you in a $1000 hammer?

The $1000 hammer is a myth. Actually, it's even a badly reported myth--the usual figure cited by the media back in the Eighties was $600, and the real number on the books is $435.

Still, that seems rather shocking...until you dig deeper and realize that the hammer's actual cost was fifteen dollars. Sydney Freedberg described the issue in Government Executive magazine way back in 1998 [govexec.com].

One problem: "There never was a $600 hammer," said Steven Kelman, public policy professor at Harvard University's John F. Kennedy School of Government and a former administrator of the Office of Federal Procurement Policy. It was, he said, "an accounting artifact."

The military bought the hammer, Kelman explained, bundled into one bulk purchase of many different spare parts. But when the contractors allocated their engineering expenses among the individual spare parts on the list--a bookkeeping exercise that had no effect on the price the Pentagon paid overall--they simply treated every item the same. So the hammer, originally $15, picked up the same amount of research and development overhead--$420--as each of the highly technical components, recalled retired procurement official LeRoy Haugh. (Later news stories inflated the $435 figure to $600.)

"The hammer got as much overhead as an engine," Kelman continued, despite the fact that the hammer cost much less than $420 to develop, and the engine cost much more?"but nobody ever said, 'What a great deal the government got on the engine!' "

Thus retold, the legend of the $600 hammer becomes a different kind of cautionary tale. It is no longer about simple, obvious waste. The new moral is that numbers, taken as self-explanatory truths by the public and the press, can in fact be the woefully distorted products of a broken accounting system.

I don't for a minute deny that waste exists in some government programs, but it's time to put this particular tired old tale to rest. Repeating it just damages the credibility of the speaker.

Re:They don't pay taxes.

[DAldredge]

I was talking about the goverment orgs pushing for the taxes not paying taxes. I was not talking about the people that work in goverment.

For example the USPS doesn't have to pay gas tax nor do they have to register their govermental vehicles. I also think they are exempt from all property taxes.

Re:First "OH MY GOD THIS SUCKS FOR NAT" Post

[lkatz]

Not necessarily. According to this article [cnn.com] over at CNN Money, 11 states have an illegal drug tax. Read below:

Illegal drug tax:

At least 11 states, including Alabama, North Carolina and Nevada, tax people who possess illegal drugs. Usually, though, you have to be in possession of a minimum quantity (for example, over 42.5 grams of marijuana in North Carolina) to be subject to the tax.

But no need to wait for the police to cuff you before you cough up the cash. In North Carolina, for instance, when you acquire an illegal drug (or even "moonshine"), you can go to the Department of Revenue and pay your tax, in exchange for which you'll receive stamps to affix to your illegal substance. The stamps serve as evidence you paid the tax on the illegal product.

Don't worry that you might get in trouble for admitting you have enough drugs to fuel a rave party for years. You needn't provide any identification to get the stamps and it's illegal for revenue employees to rat you out. Still, according to North Carolina's department charged with collecting the unauthorized substance tax, only 77 folks have voluntarily come forward since 1990. Most of them are thought to be stamp collectors. (Or perhaps they were just high?)

The majority of the $78.3 million the state has collected thus far has come from those who got busted and were found without stamps.

But even if they had had stamps, it's not like their legal troubles would be over. "Purchasing stamps only fulfills your civil unauthorized substance tax obligation," according to the N.C. DOR Web site.