This morning the 1st District Court of Appeal in Tallahassee’s Southwood district ruled that the state’s “communications services tax” — currently undergoing revision in the Legislature’s budget talks — is unconstitutional.
Judge L. Clayton Roberts, writing for the majority in a 20-page opinion, ruled that the CST contravenes state law because it unfairly favors cable providers and discriminates against satellite television in Florida, whose operations are largely based outside the state, violating the U.S. Constitution’s Commerce Clause.
“A state law is discriminatory in effect if it affects similarly-situated entities in a market by imposing disproportionate burdens on out-of-state interests and conferring advantages upon in-state interests,” wrote Roberts.
“Here, the sales tax portion of the CST is discriminatory in effect because it affects similarly-situated entities, cable and satellite companies, by imposing a disproportionate burden on satellite service and conferring an advantage upon cable services, which use in-state infrastructure.”
The ruling introduces a vexing new wrinkle into the Legislature’s plans to include a cut to the CST as part of the House’s tax-cut package. The House originally wanted more than $600 million dollars in cuts to state fees and taxes, whereas the Senate included $253 million for future revenue reductions.
But the matter is now considerably more complicated.
The Legislature cannot enact provisions related to any law found to contradict the constitutions.
Judge Simone Marstiller issued a dissenting opinion in which she wrote that there is no discriminatory purpose immanent within the CST law.
“I do not agree the satellite and cable providers are similarly situated entities for purposes of dormant Commerce Clause analysis; in my view, the majority opinion fails to fully consider all the differences between the two,” wrote Marstiller.
Noting that though cable companies rely “on local rights-of-way and employment of Florida workers as in-state economic interests,” both industries have employees and substantial investment in Florida-based operations.
The House and Senate are slated to vote on a final budget next Friday, June 19.
Whether it will include general revenue funds to backfill a loss in projected revenue stemming from the CST for next fiscal year or proceed on the basis that tax will remain in effect despite the adverse decision remains to be seen.
Speaker Steve Crisafulli told the press on Thursday afternoon he was aware of the ruling, but had not yet been briefed on it.