Center for Technology and Innovation

Why Your Ne⁠t⁠fl⁠i⁠x B⁠i⁠ll ⁠i⁠s H⁠i⁠gher ⁠i⁠n Flor⁠i⁠da

By: Turner Loesel / 2024

Turner Loesel

Research Assistant

Center for Technology and Innovation


April 1, 2024

If you live in Florida, your Netflix bill just went up.

On February 15th, Netflix announced it would begin collecting Florida’s Communication Services Tax (CST). The tax applies to cable and satellite TV, video and music streaming services, and voice-over-internet protocol (VoIP) platforms. As these services have expanded and become part of our daily lives, the tax has been routinely broadened to encompass new services it was never intended to cover. Last year, as students and parents embraced digital education, the Florida Department of Revenue (DOR) expanded the tax to include online learning services.

The CST comprises of a state rate of 7.44% and a local CST that varies among Florida’s 481 jurisdictions, ranging from just 0.3% in Lake Buena Vista to 7.6% in Sanford. Combining the two taxes can result in consumers paying up to 15% per service, dwarfing the state’s 6% sales tax. As a result, Florida has the 12th highest tax rate on wireless services nationwide, meaning Floridians are paying more than most Americans for critical communications services. 

Florida’s CST is a lucrative revenue source for municipal governments, providing around $373 million annually. Local governments also have the flexibility to adjust the local rate to match financial needs.  When CST revenues decline or budgets need to increase, local governments can quickly hike rates to recoup lost income. In the last five years alone, jurisdictions have collectively raised their local CST rates 134 times. While this approach helps stabilize government revenues, the tax compels Floridians to pay more for communication services. 

In December 2023, the Florida House Ways and Means Committee discussed remedies to the CST. The committee expressed concerns about the high tax rates, noting that the taxed services didn’t harm consumers any more than their untaxed counterparts. There was also scrutiny from committee members over how CST revenue was allocated, with suggestions it should support specific communication-related projects, such as upgrades to communication infrastructure, rather than going into the general revenue fund. 

Addressing some of the committee’s concerns in the last legislative session, Florida temporarily halted local governments’ ability to raise their CST rates until January 2026. In the upcoming session, with that freeze due to sunset soon, lawmakers should consider extending the rate freeze to minimize volatility in prices for consumers.

While the freeze on local jurisdictions would be a step in the right direction, more is needed to modernize the tax. First, the legislature should define digital services more precisely to avoid arbitrary expansions of the tax. For example, while Netflix is finally collecting the CST, Hulu and Amazon Prime have been collecting it for years. 

In fact, for the last three years, when CST revenues declined, the DOR issued statements incorporating new platforms to the tax base. Stagnations in tax revenue in early 2022 were followed by the department’s expansion of the CST to music streaming services like Spotify. The lack of a clear definition forces the DOR to clarify if a company is subject to the tax instead of services automatically collecting it, leaving millions of dollars on the table as companies cannot collect the tax retroactively. 

A comprehensive overhaul of the CST would be ideal. 

A 2013 working group to reform the tax unanimously concluded that the best way to reform the CST was to group services under the existing sales tax structure, which is not currently levied on communications services. Simplifying the CST could stabilize revenues without resorting to frequent rate adjustments or expansions.

Other states employ simplified tax structures. At least thirty-three of the 45 states that collect a tax on streaming services include it in their sales tax base. Florida and Delaware stand alone as states that impose streaming-specific taxes instead of collecting a general sales tax. 

Expanding the tax base at lower rates could increase revenue without the current system’s volatility, ensuring the tax structure remains relevant as new services emerge. Meanwhile, continuing to freeze local CST rate increases and aligning the state rate with the sales tax could save Floridians $169 million annually. Floridians would benefit from increased disposable income, uplifting local economies as consumers have more money to spend, save, or invest.

While the CST has provided substantial revenue for municipal governments, its current structure raises concerns about overburdening consumers and lacks clear guidelines for taxation. Moving forward, there’s a pressing need for comprehensive reform that aligns Florida’s approach with those of other states. The immediate focus should be on refining the CST’s definitions of digital services to halt its needless expansion and alleviate the confusion faced by businesses, fostering a more stable tax environment for all.