Center for Technology and Innovation

Flor⁠i⁠da’s D⁠i⁠g⁠i⁠⁠t⁠al Tax Trap: How ⁠t⁠he Commun⁠i⁠ca⁠t⁠⁠i⁠ons Serv⁠i⁠ces Tax S⁠t⁠⁠i⁠fles Innova⁠t⁠⁠i⁠on

By: Dr. Edward Longe / 2025

Dr. Edward Longe

DIRECTOR OF NATIONAL STRATEGY

Center for Technology and Innovation

2025

Executive Summary

Florida’s Communications Services Tax (CST), enacted in 2001 to simplify the taxation of communications services, has evolved into one of the nation’s most burdensome and complex telecommunications taxes. With a combined state and local rate that can exceed 15% of a consumer’s bill, Florida ranks among the most expensive states for communications services. This paper identifies three critical problems with the current CST system.

First, the tax’s broad and ambiguous definition of “communications services” has enabled continuous expansion through administrative interpretation rather than legislative action, recently extending to services like celebrity video messages and online education platforms. Second, the variation in rates across Florida’s 481 taxing jurisdictions creates significant administrative complexity and regional cost disparities. Third, despite generating over $608 million in revenue in 2023, CST proceeds are diverted to general funds rather than supporting critical communications infrastructure.

To address these challenges, this paper recommends three key reforms: extending the current CST rate freeze beyond 2026 to prevent jurisdictional rate increases, establishing clearer legislative definitions of taxable services to prevent administrative overreach, and mandating that CST revenues be dedicated first to communications infrastructure before general spending. These reforms would enhance regulatory certainty, protect consumers from rising costs, and ensure tax revenues support the infrastructure they were intended to fund.

Introduction

In 2001, the Florida Legislature enacted the Communications Services Tax (CST) Simplification Law, aiming to establish a “fair, efficient, and uniform method for taxing communications services sold in Florida.” Despite noble intentions, the CST has evolved into one of the nation’s most regressive, investment-deterring, and anti-competitive taxes.

The impact on consumers is particularly severe. The CST has made Florida one of the most expensive states in America for essential communications services, placing a significant burden on residents and businesses alike. This outcome starkly contrasts the original goal of simplification and efficiency. Most concerning is the fact that poorly written definitions and ambiguities have led to more services being taxed than originally intended.

As a result, the CST now presents a significant obstacle to Florida’s technological advancement and economic competitiveness, underscoring the urgent need for reform to align the tax with its initial objectives and the current needs of Florida’s citizens and businesses.

Read “Florida’s Digital Tax Trap: How the Communications Services Tax Stifles Innovation” here.