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Florida works to kill potential VoIP tax

Florida legislators take step toward killing law that could tax businesses using Internet telephony and other networking technologies.

Internet telephony supporters won a big victory in Florida last week when legislators voted in favor of repealing part of a communications tax on businesses that run their own networks.

The State House of Representatives voted unanimously on House Bill 49, which removes the tax from Florida's tax code. Bill sponsor John Stargel, a Republican in the Florida House of Representatives, said the move would "encourage growth and investment in the state." The bill must now be considered by the state Senate, expected to weigh it next month.

The complex tax dates back to telecommunications deregulation in the 1980s. The statute was originally meant to tax businesses that bypassed the local telephone network by establishing their own communications networks.

While it was originally written with technologies such as satellite and microwave in mind, critics have argued that it could be applied to businesses carrying voice traffic over their IP data networks, as well as individual customers of companies like Vonage that provide voice over Internet Protocol services, which route phone calls over the less-expensive, less-regulated Internet.

Critics also argue that the language of the so-called "Substitute Communications Tax" could be applied to businesses with networked computers, two-way radios and wireless dispatch systems. If the law is strictly enforced, the added expense could cripple small businesses throughout the state and stifle economic development, said Florida TaxWatch, a business-supported organization that closely monitors state spending and supports the repeal.

Last year the tax brought in about $352,000, but if enforced under stricter guidelines, it could jump as high as $500 million, according to Florida TaxWatch. Money from the tax would go to state and local governments, as well as toward the construction and renovation of public schools.

At the end of the 2004 legislative session, the Florida Senate passed a bill that would have prevented collection of the tax until 2006, and sent it to the House. But former House Speaker Johnnie Byrd refused to consider it.