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May 27, 2004

June 22 Fact-finding Workshop Scheduled on Substitute Communications Systems Issues

TALLAHASSEE - The Florida Department of Revenue will hold a fact-finding workshop June 22, 2004, on how a complex provision of a 2001 communications services tax law may apply to certain communications technology used by Florida businesses, the Department announced Wednesday.

The workshop will be held at 9:30 a.m. June 22 in the auditorium of the R.A. Gray Building, 500 S. Bronough Street, Tallahassee. The Department will ask businesses, accountants, and local governments to provide information on what kinds of technology might be subject to tax under a law imposing Florida communications services tax on technology known as "substitute communications systems." Questions have arisen on whether such communications technologies as business computer routing equipment, PBX telephone exchanges, radio systems, or point-of-sale inventory systems are "substitute communications systems" within the meaning of the law. Additional workshops may be necessary but have not yet been scheduled.

As part of an extensive reform of Florida telecommunications tax law in 2001, the Florida Legislature applied communications services tax to the depreciation and other operating expenses of "substitute communications systems." The 2001 legislation defined these systems as any system capable of transmitting, conveying, or routing signals used as a substitute for purchasing services from a communications company.

Language in this portion of the statute was based on a 1985 law that required a small number of companies operating their own internal telephone systems to pay the same kinds of taxes that they would pay if they bought a similar service from a telephone company.

However, rapidly evolving communications technology, potential changes in federal regulations, and expansion of sophisticated information routing equipment have raised questions about how Florida businesses and local governments should apply the 2001 law.

Legislation to defer administration of the 2001 statute was proposed in the 2004 legislative session, but the session ended before the legislation was adopted.

The fact-finding workshops will be conducted under the provisions of Chapter 120, which governs rulemaking by state agencies. For additional information, interested parties should watch for notices of the workshops to be published in the Florida Administrative Weekly and in the "Proposed Rules" section on the Department's web site (

After gathering information, the Department will proceed with formal rulemaking on the issue under the provisions of Chapter 120. Under these provisions, the Department will draft a proposed provision of Florida Administrative Code to administer the law, conduct public hearings on the proposed rule language, and submit a draft based on input at the public hearings to the Governor and Cabinet for their consideration. The Governor and Cabinet must vote on whether to approve the proposed rule. Taxpayers should seek advice from their tax advisors on how to comply with the 2001 law.