SHARE:
Florida TaxWatch Economic Commentary
The Communications Services Tax: Time for a change
The CST continues to burden Florida taxpayers, families, and businesses
A true “apples to apples” comparison of CST rates among the states is difficult. But a comparison of wireless rates finds that Florida has the fourth highest tax rate in the country, trailing only Washington, Nebraska, and New York.3 The top ten states are shown below.
| Top Ten States with Highest Average Wireless Tax Rate in 2014 Source: Tax Foundation |
||||
| Rank | State | Wireless State + Local Tax Rate | Federal USF Rate | Combined Federal, State, and Local Taxes |
| 1 | Washington | 18.60% | 5.82% | 24.42% |
| 2 | Nebraska | 18.48% | 5.82% | 24.31% |
| 3 | New York | 17.74% | 5.82% | 23.56% |
| 4 | Florida | 16.55% | 5.82% | 22.38% |
| 5 | Illinois | 15.81% | 5.82% | 21.63% |
| 6 | Rhode Island | 14.58% | 5.82% | 20.41% |
| 7 | Missouri | 14.58% | 5.82% | 20.40% |
| 8 | Pennsylvania | 14.05% | 5.82% | 19.87% |
| 9 | Arkansas | 13.43% | 5.82% | 19.26% |
| 10 | South Dakota | 13.02% | 5.82% | 18.84% |
A typical wireless service user4 in Florida faces a combination of local, state, and federal impositions that can add up to more than a 22 percent tax on their bills. This translates into over $11 per month in taxes, fees, and surcharges on a $50 bill that could have been spent in other goods and services. These taxes are a tremendous burden to Florida families, especially low-income individuals and families, who spend a larger share of their income on these services. Wireless is increasingly the only telephone service used by low income individuals. A Centers for Disease Control survey found that 59.1 percent of all poor adults only used wireless services in 2013, up from 42.8 percent in 2010.5
"The Communications Services Tax: Time for a Change"
Florida’s high CST rate makes the tax distortionary. Florida has the third largest disparity between wireless and general sales tax rates according to the Tax Foundation.6 Therefore, switching to prepaid calling, which is taxed at the much lower state sales tax of 6 percent, is increasingly attractive to Floridians. There are also internet video services that may not be taxed at all. This shows that the CST is not neutral, as it causes individuals and firms to alter their economic choices, as recommended in a Florida TaxWatch Briefing in 2013.7
3 Tax Foundation. “Wireless Taxation in the United States 2014”. October 2014.
4 Such as a cell phone contract user. Internet is exempt from taxation by federal law, and pre-paid calling services (if only limited to telephone service) is subject to sales tax in lieu of CST.
5 Centers for Disease Control and Prevention. “Wireless Substitution: Early Releases of Estimates from the National Health Interview Survey, January-June 2014.”
6 Tax Foundation. “Wireless Taxation in the United States 2014”. October 2014.
7 Florida TaxWatch Briefing. “Legislature should Reduce Florida’s High Communications Services Tax”
» NEXT PAGE: More competitive prices help boost investments, and the conclusion
