Substitute Communications Systems

Two years ago the definition of “substitute communications systems” was amended to read – s. 202.11(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.  In the fall of 2003, the DOR tried to draft rules to enforce the tax.  This onerous tax was met with strong opposition from the business community as it would have cost millions of dollars to implement.

For CPAs preparing financial statements for companies subject to the tax, the confusion was only complicated by rules drafted by DOR in the fall of 2003 that were never enforced in hopes that the tax would be repealed during the 2004 session.  When that didn’t happen, a special session last December was nearly expanded to include the discussion of legislation to repeal the tax on substitute communications systems.  This move was predicated by a concern by public companies in Florida that provisions in Sarbanes/Oxley would require disclosure for public companies of the potential tax liablility even though DOR was not enforcing the collection of the tax. 

During the 2005 regular session, we participated in a coalition with nearly thirty other business groups to support the passage of HB 49 by Rep. John Stargel and SB 818 by Sen. Mike Haridopolos to repeal the tax on substitute communications systems.  HB 49 unanimously passed all three committees of reference in the House and the House floor on March 10, 2005 by a vote of 117 – 0.  SB 818 was not heard before a committee.  Instead, a second bill in the Senate similar to SB 818 was filed by Sen. Lee Constantine.  This bill, SB 2070, was similar to HB 49 but included language for a moratorium on the tax instead of a full repeal.

In a speech on January 18, Governor Bush indicated that he supported the full repeal.  Despite our lobbying efforts, HB 49 sat on the Senate calendar for over seven weeks after it passed the House.  On the last night of session, SB 2070 was amended to include a full repeal, passed the Senate by a vote of 40 to 0 and sent to the House.  However, at 11:00 p.m., the House had not received the bill in messages from the Senate.  Apparently, the Senate President had been holding the bill at the rostrom.  The Senate Secretary actually walked the bill across the 4th floor rotunda from the Senate floor to the House floor.  The House took up the bill shortly before midnight and sent it to the Governor.

The FICPA supports a repeal of the communications services tax as it relates to the taxation of substitute communications systems.

SB 2070 – Communications Services – Sen. Lee Constantine (R-22)