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[802SEC] Ears get burned on taxing LANs

The Business Journal of Jacksonville - October 6, 2003

Businesses upset by state network taxes
Officials cite misconception
Devan Stuart

JACKSONVILLE -- The state Department of Revenue is getting a barrage of negative comments, including a "flamer e-mail from Singapore," about an alleged proposal that would hit Florida businesses with a 9.17 percent tax on computer networks, namely local area networks, called LANs, and wide area networks, called WANs.

But it simply isn't so, said department spokesman David Bruns.

"There has been some misunderstanding," he said. "It's been portrayed by some of the business associations as the Department of Revenue creating a law to make people pay. We don't write tax law."

Rather, the 9.17 percent tax already exists, and has for two years. Proposed in 2000 and enacted the next year, the communications services tax streamlined the tax structure, eliminating or consolidating seven state and local taxes into two: the state communications services tax and the local communications services tax.

The state tax rate is 6.8 percent plus a gross receipts tax rate of 2.37 percent, for a combined state communications services tax rate of 9.17 percent. Local tax rates vary.

At issue is whether definitions of "substitute communications systems" should apply to LANs and WANs. Nearly every company with two or more computers operates on a LAN.

The original definition adopted in 1986 before today's LANs and WANs existed, included "any system that routes electronic signals that would be a substitute for a commercially operated communications line," Bruns said.

The 2000 update broadened the definition to "essentially any electronic exchange of signals, data or information," he said. "The question is, does that apply to a local area network [or wide area network] routing device? The legislation is very broad and so is the 2000 legislation."

Department officials set out to study how taxing LANs and WANs would affect businesses, holding a rule developing workshop and inviting business associations and other interested parties to comment.

Officials got an earful and halted further study
until it gets word from state legislators, who begin committee meetings in October.

If legislators fail to address the issue, the department will resume rule development after the 2004 legislative session.

2003 American City Business Journals Inc.

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