Consumer eViews

Volume 2, Number 16, April 18, 2005    

I am joining state lawmakers and business groups in calling for the repeal of an onerous tax that would financially burden small and large businesses, their employees and customers, as well as hinder the state’s ability to recruit and retain new business to Florida.   

Under current Florida law, the tax applies to “the transmission, conveyance, or routing” of voice, data, audio, video and cable services, through electronic, radio, satellite, cable, optical, microwave or other media.  Experts say if the tax language is fully applied it could cost Florida businesses hundreds of millions, as much as 13 to 14 percent of the annual operating cost of all communications equipment covered by this provision of law.   

Legislation to repeal the tax is being sponsored by Representative John Stargel from Lakeland (House Bill 49) and Senator Mike Haridopolos from Melbourne (Senate Bill 818). It makes sense to repeal the tax in the wake of new estimates that Florida will see an extra $2.2 billion in taxes next year.  The measure to repeal the tax has passed the House and is currently pending in the Senate. 

Joining us at the press conference to highlight the potential costs to small and large businesses in Florida were Rick Kearney, Chair of ITFlorida, Inc., Rick McAllister from the Florida Retail Federation, John Sebree from the Florida Realtors Association, and Steve Birtman from the National Federation of Independent Business.
The substitute communications tax was instituted in 1985 as a part of the state’s gross receipts tax on telephone service.   The provision originally applied to internal telephone, intercom, and telecommunications systems that companies operated as a substitute for systems operated by a telephone company.   Only a small number of companies currently pay tax under this provision, amounting to about $400,000 per year.  

However, in 2000, state lawmakers revamped Florida’s telecommunications laws and changed the communications tax language to more broadly capture other types of communications equipment. The new law became effective in October 2001 but the tax imposed on substitute communications systems has not been enforced by the Florida Department of Revenue (DOR) because of continuing uncertainty about how the law applies to a rapidly changing communications and business environment.   

If enforced, a company operating a taxable substitute communication system would owe tax, penalty and interest back to 2001.  Companies would owe tax based on their cost of operating substitute systems, including depreciation on equipment and salaries of staff who maintain and repair them.  The tax would not apply to the initial purchase of the equipment.

In roundtable meetings that I held recently with small business leaders across the state, alarm was expressed about the Substitute Communications Systems tax. No other state in the country has this tax. It is a ticking time bomb for Florida’s businesses and we need to get it off the books. Just the threat of it puts Florida at a disadvantage in a highly competitive national and worldwide business environment.

                      -- Tom Gallagher


Florida’s Chief Financial Officer Tom Gallagher proudly announced the names of six students who were the top picks in an essay contest aimed at encouraging financial literacy among middle and high school students.  Gallagher presented checks to three of the students at their schools in both Orlando and Tampa.

The contest, “Cash in on Your Money Smarts,” asked students, ages 14 to 18, to submit at least a 750-word essay on why they considered themselves money smart and offered students a chance at more than $7,500 in prizes statewide.  First, second and third place prizes will be awarded to teens in given geographic regions, for a total of 15 winners statewide.  Nearly 600 students participated this year.

“This essay contest was a great way to encourage Florida’s young people to show off their financial knowledge and writing skills, and reward them for it,” Gallagher said.  “Learning these valuable skills now will pave the way for a lifetime of financial success.”

The six winners named today represent two (Region 3 and Region 4) of the five regions that competed in the contest.

In Region 3, 186 essays were submitted covering a 12-county area, including Hernando, Pasco, Pinellas, Hillsborough, Manatee, Hardee, Highlands, Desoto, Sarasota, Charlotte, Lee and Collier counties.  The winners are:

First Place:  Katie Reynolds, 17, is in 11th grade at H.B. Plant High School in Tampa

Second Place:  Melissa Gallahon, 17, is in 12th grade and home schooled in St. Petersburg

Third Place:   Robert Buesing, 18, is in 12th grade at H.B. Plant High School in Tampa

In Region 4, 219 essays were submitted covering a 14-county area, including St. Johns, Putnam, Flagler, Marion, Citrus, Sumter, Lake, Volusia, Seminole, Orange, Osceola, Polk, Brevard and Indian River counties.  The winners are:

First Place:  Haylee Linduff, 15, is in 10th grade at Circle Christian School in Altamonte Springs

Second Place:  Scott Chapman, 18, is in 12th grade at George Jenkins High School in Lakeland

Third Place:  Kimberly Thomas, 17, is in 12th grade at William R. Boone High School in Orlando

Winners in Regions 1, 2 and 5 will be announced within the next two weeks.

First, second and third place winners will receive $750, $500 and $250 respectively.

The essay contest is part of Gallagher’s statewide public education initiative, Your Money, Your Life, which is designed to help Floridians stretch limited budgets, avoid debt and build assets, including savings and home ownership.  Gallagher started the program last fall in response to a recent survey reporting that many Floridians put themselves at financial risk by waiting too late to save and by running up debt.  The program includes a comprehensive educational website available at

Judging the contest were representatives from the Florida Council on Economic Education, a non-profit organization that supports financial education initiatives in schools and businesses statewide.  In addition, department employees Fred Varn and Greg Thomas, who serve on their area school boards, participated in the judging process.

Joining Gallagher to present checks to the first and third place winners in Tampa was local representative Trey Traviesa.   “Financial literacy empowers individuals by giving them the tools to make informed decisions about their financial matters and encouraging personal accountability for those decisions,” said Rep. Traviesa.  “I think it is great that this program encourages young people to start preparing now for the many important financial decisions they will make in the future.”

Financial support for the “Cash in on Your Money Smarts” essay contest is provided by a grant from the Investor Protection Trust (IPT).  The IPT is a nonprofit organization devoted to investor education. Since 1993, the IPT has worked with the States to provide the independent, objective investor education needed by all Americans to make informed investment decisions. Their website is


Florida’s Chief Financial Officer Tom Gallagher announced the completion of a sweep of construction sites across areas of Florida to verify that employers are complying with state workers’ compensation insurance laws.  As part of the statewide effort, teams of investigators with the Department of Financial Service’s Division of Workers’ Compensation made random site visits last week in Volusia, Brevard, Palm Beach, St. Johns, Flagler and Duval counties, ordering dozens of employers to stop working because employees were not properly covered by workers’ compensation insurance.

“Employers who avoid paying workers’ compensation premiums contribute to the rise in workers’ compensation rates and gain an unfair advantage over competitors,” said Gallagher.  “A healthy workers’ compensation system is crucial to Florida’s economic health, and we will continue to aggressively investigate instances of fraud and abuse.” Under state law, businesses engaged in the construction industry with one or more employees must provide workers’ compensation coverage, which protects workers who are injured or killed on the job.

During the sweep, investigators issued 94 Stop Work Orders (SWOs) to construction businesses, including general contractors and sub-contractors, who are in violation of Florida’s workers’ compensation requirements.  Thirteen Stop Work Orders were issued to employers who were paying their employees in cash and were not reporting these cash payments to their insurance carriers.  Investigators also issued 110 requests for business records to employers in which non-compliance could not be readily determined at the job site.

Many of the contractors who were found to be in compliance thanked the investigators for their work.  They said they are constantly being underbid on jobs by companies that don’t protect their workers and have lower costs.

Under a SWO, a business must immediately cease all business operations.  The SWO is lifted once the employer obtains the proper coverage and pays a civil penalty equal to the amount of 1.5 times the workers compensation premiums avoided.  Employers who violate a Stop Work Order face a penalty of $1,000 per day of violation and may also face criminal charges. 

During the 2003 legislative session, lawmakers made several important reforms to the workers’ compensation system in an effort to stem the tide of rising premiums.  As part of the reforms, the Division of Workers’ Compensation was granted greater enforcement authority to ensure businesses provide coverage for their employees.  Many of the violations uncovered during this week’s sweep fall under the new authority. 

To increase competition among businesses operating in Florida, the Legislature in 2003 required:

  • Out-of-state businesses operating in Florida must pay Florida-approved workers’ compensation rates for coverage.  This prevents non-Florida businesses from gaining an unfair advantage over locally owned businesses.
  • Employers who misrepresent the number or classification of their employees be subject to an immediate Stop Work Order.  Previously, a criminal investigation was required to take action against the employer. 
  • Employers wishing to exempt themselves from coverage requirements obtain a new exemption, providing greater tracking ability to state regulators.  This measure was aimed at preventing contractors from claiming that employees were subcontractors who were exempt from coverage, thereby avoiding payment of premiums and gaining an unfair advantage over competition.

“Florida workers deserve to be protected in case they are injured on the job,” Gallagher said.  “An employee without coverage who is seriously injured or disabled stands to lose not only his livelihood but also the benefits he needs for medical bills and recovery.”

Below are examples of Stop Work Orders issued this week.  Statewide, investigators made contact with over 900 businesses, including subcontractors, and issued more than 75 SWOs.  Final information, including penalty amounts, will be available after investigators review business records which were ordered.

One concrete block sub-contractor was issued a SWO; he had nine men working on a job site in Port Orange but had coverage for only five.  He said the employees without coverage had just started that day, but his compensation carrier did not have paperwork for the employees, thus they had no coverage.  Had one of the non-covered employees suffered an injury, he would have had no medical benefits and no income. 

Seven framers from Georgia were working on a condominium project in St. Augustine that was shut down.  There was no workers’ compensation coverage for any of the workers. 

Five Spanish-speaking drywall installers were found working in Volusia County with no workers’ compensation coverage.  The sub-contractor who employed them produced paperwork making each worker an individual corporation to attempt to exempt them from workers compensation coverage.  He said he “paid them per board,” and was ordered to produce financial records within five days. 


Florida’s Chief Financial Officer and State Fire Marshal Tom Gallagher applauded the passage of legislation, sponsored by Sen. Daniel Webster and Rep. John Stargel, that would require all of the state’s nursing homes to have automated fire sprinkler systems by 2009. 
A loan guarantee program would be made available to help the estimated 35 nursing homes, mostly older facilities, that currently are not protected by any kind of sprinkler system. 
 “A fire sprinkler system could be the difference between life and death for nursing home residents who are disabled or have limited mobility,” Gallagher said.  “An uncontrolled fire can quickly overwhelm a senior citizen, even one who has practiced evacuating safely.”
About 300 residents were evacuated from Westminster Care of Orlando after a fire broke out one evening in October of 2003.  No one was seriously injured, but about a dozen residents required treatment for minor cuts and scrapes and smoke inhalation.  Fire officials credited the home’s automated fire sprinkler system as the reason for the residents’ safe escape.  Webster, of Winter Garden, represents the area in the Legislature.
“We’ve taken an important step in preparing nursing homes for an event we all hope will never happen,” Webster said.  “But fires do happen and when they do, seniors deserve a fighting chance to safely escape.”
“When an individual needs the services of a nursing home, they need special care and consideration,” said Stargel, of Lakeland.  “We should not leave their safety to chance.”
The nursing homes without fire sprinkler systems represent 4,200 beds, but regulators have estimated that there could be as many as 5,000 unprotected nursing home beds.  This represents about 5 percent of Florida’s nursing home beds.
All hazardous areas, such as boiler rooms, paint shops, soiled linen rooms and trash collection rooms, would be required to be protected by an automated fire sprinkler system by December 31, 2007.  All remaining areas of each existing nursing home would have to be protected by an automated fire sprinkler system by December 31, 2009.



Urges Consumers to Verify Organization and Agent Authorization

Florida’s Chief Financial Officer Tom Gallagher urged Floridians interested in signing up for a medical discount card plan to verify it is licensed to do business in the state.  Legislation passed last year requires companies selling plans in Florida be licensed as of March 31, as well as the agents selling the plans must be disclosed.  
“This is an industry where the potential for rampant fraud was great.  Too many Floridians were being ripped off by unscrupulous operators, and many were made to think they were buying health insurance when in fact they were signing up for discounts on medical services or prescriptions,” said Gallagher, who oversees the Department of Financial Services. “Consumers who are presently paying for a discount medical plan or are considering signing up for one need to Verify Before You Buy.”   
Discount medical plans can no longer use the word “insurance” in their advertising or in their paperwork.  They also cannot use terms that may confuse a consumer into thinking a plan is insurance such as guaranteed issue, co-payments, coverage, health plan, enrollment or premium.  Discount card plans only offer a reduction in the cost of a prescription or medical service. 
Discount medical plans must file any contract language with the Office of Insurance Regulation and they must list all discounts and fee schedules included in the plan.  They also must disclose their network of doctors and services.  In addition the plans must meet new financial solvency requirements to operate in Florida. 
To verify that a plan is authorized go to or call 1-800-342-2762.  A list of the discount medical plans that are currently licensed is below. 
Consumers interested in signing up for a discount medical plan should consider the following:
• Consumers are often required to pay a monthly fee of up to $100.  If the plan charges over $30 a month or $360 per year it must be licensed with the Office of Insurance Regulation. 
• Ask about the plan’s cancellation and refund policies - be wary of plans that ask you to pay the entire yearly fee up front.  Also, check for hidden costs or fees.
•  Call some of the providers listed in the plan.  There have been instances where physicians were unaware they were listed by discount card sellers.
• Seniors should check if providers will allow discounts below scheduled Medicare rates.
• Does the plan require advance notice?  In some cases up to 30 days notice has been required for doctor’s visits or hospitalization.
• Advertised prescription discounts can change frequently or may apply to a restricted drug list.  In some cases a generic drug may be cheaper than a brand name drug. 
But most importantly Gallagher said to make sure the plan is licensed.  If it is not, that is a red flag - please Verify Before You Buy!
Discount medical plans that are currently licensed in Florida include:
  • 20/20 Eyecare Plan, Inc., Ft. Lauderdale, FL
  • Aetna Life Insurance Company, Hartford, CT
  • Ameriplan Corporation, Plano, TX
  • The Capella Group, Inc., Grand Prairie, TX
  • Careington International Corporation, Frisco, TX
  • Compbenefits Company, Roswell, GA
  • Dental Network Of America, Inc., Oakbrook Terrace, IL
  • Newbn, Inc., Dallas, TX
  • Starmark Benefits, Inc., Coral Springs, F
  •  Benefit Services of America, Inc., Altamonte Springs, FL
  • Sunshine Medical Network II, Inc., Miami, FL
  • Florida Health Solution, Corp., Miami, FL


A Louisiana contractor is facing felony charges for failing to obtain workers’ compensation insurance for workers he brought into the state to rebuild hurricane-damaged roofs in Central Florida.

Todd Woods, 37, owner of A-1 Construction and Roofing, was arrested Monday by investigators with the Department of Financial Services, Division of Insurance Fraud.   He is charged with failure to obtain Florida workers’ compensation insurance, a second-degree felony punishable by up to 15 years in prison, and presenting false information as evidence of compliance, a third-degree felony punishable by up to five years in prison.  Woods was booked into the Osceola County Jail and released on $1,500 bail.  The Osceola County State Attorney’s Office is prosecuting the charges.

 “When workers show up to perform a job, they deserve to be protected in case they get injured,” said Florida’s Chief Financial Officer Tom Gallagher, who oversees the department.  “Employers who don’t protect their workers will be held accountable.”

Woods had coverage with the Louisiana Workers’ Compensation Corporation (LWCC), but the policy clearly states that the coverage does not cover work performed outside of Louisiana. Investigators found that Woods had obtained numerous permits from the Osceola County Building Department and St. Clouds Building Department for roofing jobs. 

In October 2004, Don Schmidt, owner of Schmidt Contracting and Roofing in St. Cloud, subcontracted with A-1 to repair hurricane-damaged roofs in Poinciana, and Schmidt requested proof of workers’ compensation insurance.  Woods provided the LWCC certificate.  When Schmidt‘s insurance company attempted to verify the coverage with the agent in Louisiana, they were informed that the policy did not cover work in Florida.

The Department of Financial Services, Division of Insurance Fraud, investigates various forms of fraud in insurance, including health, life, auto, property and workers' compensation insurance.  Anyone with information about this case or another possible fraud scheme should call the department's Fraud Busters Hotline at 1-800-378-0445.  A reward of up to $25,000 may be offered for information leading to an arrest and conviction.

Consumer Services HelpLine
(800) 342-2762.