Florida Communication Service Tax – Rule Makers to Rule Breakers

How the Florida Department of Revenue changed the rules, without a change in rules, and left an industry in turmoil.

Florida’s Communication Services Tax is imposed on “transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals, including video services…”¹ The department issued guidance repeatedly identifying that communication services tax did not apply to various forms of streamed video content. Prior to 2022, the Florida Department of Revenue issued guidance establishing that video streaming could be excluded from Florida CST because the content was not “enabling the customer to communicate.”² In 2022, with no change in law or the administrative rules, the Florida Department of Revenue changed their position and opined that tax should be imposed on the streaming of content, including tuition for online courses, prerecorded video clips, and online instructional videos.³

The Internet Tax Freedom Act (“ITFA”) is federal legislation governing the taxation of “the free flow of Interstate commerce over the Internet.”⁴ ITFA, in relevant part, restricts states from imposing discriminatory taxes, meaning taxes on electronic commerce when tax would not be applicable to transactions conducting through other means.⁵ “Electronic commerce” is defined broadly and includes any transaction conducted over the Internet.⁶ Online access to educational training content conducted over the internet falls within the broad definition of “electronic commerce.” Training conducted through other means, such as in-person courses, are not subject to Florida communication services tax. Florida tax treatment of online courses differs from the treatment of in-person courses, which creates the appearance of a discriminatory tax on electronic commerce. This is an issue of federal law preempting a Florida statute.

More succinctly put, the Florida Department of Revenue changed their position on the way CST is imposed. This was done through guidance issued to a Taxpayer. This guidance does not represent a change in the law by the Legislature, or a change in the Administrative Code by the Florida Department of Revenue. For businesses operating in Florida selling video content such as online games, personalized video content, schools that offer online classes, and a myriad of others, there is no clear through line on how to proceed. Also relevant, CST is imposed at rates up to 15% of the transaction price, potentially leaving Florida businesses with a hefty bill. If you are a Florida business with questions about Communication Services Tax, please contact us for a complimentary consultation.