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Florida removes VoIP tax from books

State Senate repeals part of law that could have imposed a tax on Net phone subscribers and businesses with their own voice networks.

A Florida law that threatened to tax Internet phone networks has officially been removed from the books.

Lawmakers in the Florida state Senate voted on the last day of the legislative session, Friday, to repeal a portion of the Substitute Communications Systems tax law. The tax could have been applied to companies that run their own VoIP networks as well as to commercial services from providers such as Vonage.

In March, a bill to remove the levy from the Florida tax code passed the State House of Representatives. But when the bill reached the state Senate, some senators changed the language from an outright repeal of the law to a moratorium, during which time the matter would be studied more carefully.

Opponents of the tax worked with legislators to push for the repeal.

"Even with a moratorium, there would be a certain level of uncertainty that might keep some businesses from investing in Florida," said Matt Doster, executive director of IT Florida, a nonprofit group that promotes the Florida business community. "We advocated strongly against the moratorium and urged the Senate to vote on a complete repeal of the tax."

Late into the night on Friday, the measure was put to a vote, and the Senate repealed the contentious portion of the tax law.

The complex tax, which was written after deregulation of the telecommunications industry in the 1980s, was originally meant to tax businesses that bypassed the local telephone network by establishing their own communications networks.

Critics argued that the language of the law was so broad it could be applied to businesses carrying voice traffic over their IP data networks and to individual customers of VoIP providers such as Vonage, which routes phone calls over the less-expensive, less-regulated Internet. The tax also could have been applied to businesses with networked computers, two-way radios and wireless dispatch systems.

Critics also argued that if the law was strictly enforced, the added expense could cripple small businesses throughout the state and stifle economic development.

"A lot of people feared that the tax would be applied too broadly," Doster said. "We think that by repealing this law, we've sent a pretty strong message to the rest of the country that we don't think this is the way to tax businesses in Florida."

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 that bill to the House. But former House Speaker Johnnie Byrd refused to consider it.