Fla. Flat Tax May Save Ops Cash

Goodbye, franchise fees. Sayonara, utility-user taxes. Those tax categories will be no more if Florida Gov. Jeb Bush signs a telecommunications-reform bill that would replace various cable levies with a flat statewide sales tax.

The legislation — supported by the Florida Cable Telecommunications Association and utility providers — passed the state Senate by a 99 to 15 vote last week. It had been approved by the state House of Representatives.

The governor is expected to sign the bill, which would go into effect Oct. 1.

The Cable Television Tax Professionals Institute is keeping a close eye on the measure, as its members may try to foster similar reform elsewhere.

Florida's tax scheme may also be the first to apply the same treatment to wireless and wireline video providers.

But the bill — which replaces a 5-percent franchise fee, various utility taxes, user fees and other assessments with a single state tax and existing local taxes — may not reduce operators' tax bills.

The state sales tax is currently 9.18 percent, while local levies range from less than 1 percent to 15 percent, according to FCTA legislative counsel Charles Dudley. To quell protests by local franchise authorities, legislators crafted a revenue-neutral measure.

The industry is likely to save money on administrative costs, though — particularly for those systems that sell bundled services.

At present, such operators are required to collect several taxes and fees for cable service, and a different set of charges on telephony. Internet service is tax-exempt.

Tax formulas can vary among Florida's 472 regulatory authorities, each of which is empowered to audit.

Cable should also benefit because non-service revenue — which includes ad sales and splits on home-shopping revenue — will no longer be included in the calculation, Dudley noted.

The telecom reform would also levy a sales tax on telephone services, replacing a gross-receipts tax.

One provision of interest to competitors is language that would tax direct-broadcast satellite providers DirecTV Inc. and EchoStar Communications Corp. under the same formula as cable operators, for the first time. That means Florida's DBS subscribers will see fees rise by a 6-percent to 13-percent margin.

Other jurisdictions are also examining satellite-TV taxation. North Carolina Gov. Mike Easley, faced with a fiscal crisis, has suggested a 5-percent satellite-TV tax in his state. His initial budget proposal estimated the tax could raise $25 million a year.

Even though Florida's flat tax has met state officials' muster, it still could face some vocal opponents on the local level.

Officials in Naples and other cities believe flat taxation violates federal cable regulations, which specifically call for local franchise taxation.

Some local governments have also said they believe the state action retroactively alters contracts in place at the local level.