If you run a streaming service, an online learning platform, a music subscription product, or a SaaS company with embedded video, you probably don't think of yourself as a communications company. However, for purposes of communications services tax (CST) The Florida Department of Revenue might.
Florida's Communications Services Tax was created in 2001 to consolidate a patchwork of telephone and cable taxes into a single regime. The state rate is 4.92% plus 2.52% in gross receipts taxes, which translates to a combined 7.44% before local CST is added on top. Local CST varies by jurisdiction and pushes the all-in rate well into double digits in many parts of the state. A CST audit can dwarf a comparable sales tax audit on the same revenue stream.
The statute hasn't really changed in twenty-five years. The DOR's reading of it has. The statutory definition reaches the transmission of voice, data, audio, video, or any other information or signals by any medium, and the DOR has used that breadth to bring in services the 2001 Legislature was never thinking about.
Each time CST collections plateau, a new TIP or TAA appears that pulls another category of provider into the tax base. Providers who didn't register find themselves with three years of accumulated tax, penalty, and interest.
The Parade of Expansion
The expansion is not subtle once you see it. CST started on phone calls and cable. It moved to DTH satellite, then VoIP, then streaming video.
Netflix announced collection of Florida CST in early 2024, and Amazon now applies CST proportionately to Prime memberships because the DOR informed Amazon that video rentals fall within the video services definition. Music streaming services like Spotify were pulled in around 2022 when collections were lagging. Online education platforms were pulled in during the period when instruction shifted heavily online.
The DOR has issued a TAA concluding that a bar exam course bundling streaming video instruction with a tablet was fully subject to CST. The next frontier is SaaS with embedded video, where the same expansion will catch companies whose product roadmaps added a video feature without anyone in finance flagging it.
The Internet Tax Freedom Act — Real Defense, Often Misunderstood
The most important federal limit on this reach is the Internet Tax Freedom Act. It is also the single most misunderstood defense in the area.
ITFA prohibits state and local taxes on Internet access, and Florida's statute reflects that — purchases of Internet access, and the communications services used to provide Internet access, are exempt from CST. What ITFA does not protect is content or services delivered over the Internet. That is why streaming video and music streaming are taxable in Florida even though they reach the customer through an internet connection.
ITFA is a real defense for ISPs and for the Internet access component of mixed offerings. It is not a get-out-of-CST card for streaming or SaaS, and most providers either don't raise it or raise it incorrectly.
Where Both Defenses Die: The Bundling Rule
Florida's bundling rule is where both the taxability defense and the ITFA defense most often die. If a
taxable communications service is bundled with otherwise non-taxable items and the charges are not separately itemized on the invoice, the entire bundled amount becomes subject to CST.
The non-taxable component does not survive the bundle. Neither does the ITFA-protected component. That is exactly how a tablet sold with a streaming video course ends up fully taxable, and exactly how an Internet access charge bundled with a video subscription loses its federal protection.
The fix is operational, not legal: invoice-level itemization with a defensible allocation methodology, applied consistently across customers. Most companies that try to clean this up retroactively after an audit notice are too late for the open period, but they can at least stop the bleeding going forward.
How the DOR Picks Targets
CST audit selection looks different from sales tax. The DOR is not running 1099-K reconciliations against communications providers — it is running registration mismatches between providers visibly serving Florida customers and the list of dealers actually registered for CST.
Federal income tax data reconciles against CST returns, recent TIPs and TAAs are previews of the next audit wave, and the rest comes from third-party tips and audits of related entities. If the DOR has published guidance touching your industry, the audits in that category are not a question of if.
The trust-fund risk is sharper for providers who did register and did collect CST on customer invoices. Collected-but-not-remitted CST is exactly the fact pattern that turns a civil audit into a criminal referral.
What To Do Now
If you operate any digital subscription, streaming, online education, or SaaS business with Florida customers, the right move is a self-assessment before the DOR runs one for you.
Get a defensible taxability memo on each product line that reflects the DOR's current reading. Identify where any Internet access component lives in your offering and make sure invoice itemization preserves the ITFA protection. Audit your bundling, because that is where the largest avoidable exposure sits. Reconcile what your billing system tagged as CST against what actually appeared on each CST return.
If a Form DR-700014 audit notice has already arrived, do not produce records or speak substantively with the auditor before consulting counsel. The first 30 days set the trajectory of the whole engagement, and decisions made early about scope, sampling, and document production drive the assessment far more than anything that happens later in protest.
About the Author: Gerald J. (Jerry) Donnini II, Esq. is a partner at the Law Offices of Moffa, Sutton, & Donnini, P.A. and concentrates his practice on Florida and multi-state tax controversy, with significant experience defending streaming, digital subscription, online education, SaaS, and communications providers against Florida CST and sales tax assessments. He can be reached at 954-642-9390 and by email at JerryDonnini@FloridaSalesTax.com