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I have to remember not to throw out my phone bills, so I can get a refund.
U.S. to give refunds for abolished phone tax
By Ken Belson The New York Times
FRIDAY, MAY 26, 2006
Bowing to changes in technology and pressure from taxpayers and phone companies, the U.S. Treasury Department said it would scrap the 108-year- old federal excise tax on long-distance phone calls. The move will bring consumers and businesses about $15 billion in refunds on tax returns next year.
The decision announced Thursday, which applies to cellphones and Internet phone services as well as some land lines, follows a series of court reversals for the government. Large businesses had successfully sued the Internal Revenue Service to recoup the taxes they paid. Phone companies also wanted the tax abolished to relieve them of having to collect it.
Originally a luxury tax to help pay for the Spanish-American War, the 3 percent surcharge had been calculated based on the length of the call and the distance of the connection. But as unlimited long-distance calling plans became commonplace, and the tax was applied to a flat monthly fee, some taxpayers argued that the tax no longer applied to them because the duration and distance of a call were irrelevant.
Though the tax will still be levied on local phone service, the government will reimburse three years' worth of taxes on long-distance calls, including any plans that combine local and long- distance calling. Consumers, who pay about 40 percent of the taxes collected, typically pay about $18 a year in excise taxes if they have a long-distance service and a cellphone.
They will be able to file for a refund on their 2006 U.S. income tax returns.
"It's time to disconnect this tax and put it on the permanent do-not-call list," Treasury Secretary John Snow said.
The decision, he added, "marks the beginning of the end of an outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history."
The abolition of the tax, effective July 31, will cost the Treasury $5 billion annually in lost revenue in the next few years. With budget deficits soaring, the Treasury had been slow to scrap the tax. But several federal courts ruled in recent years that it was no longer applicable to customers with unlimited long-distance plans.
The Internal Revenue Service has refunded hundreds of thousands of dollars in taxes to companies including OfficeMax and the American Bankers Insurance Group based on those court decisions.
While the courts said some businesses should get refunds, Congress had not repealed the tax, so the IRS was compelled to continue collecting it. This created a peculiar situation in which taxpayers who won refunds still had to pay the tax in subsequent years and then apply for another refund.
Bowing to changes in technology and pressure from taxpayers and phone companies, the U.S. Treasury Department said it would scrap the 108-year- old federal excise tax on long-distance phone calls. The move will bring consumers and businesses about $15 billion in refunds on tax returns next year.
The decision announced Thursday, which applies to cellphones and Internet phone services as well as some land lines, follows a series of court reversals for the government. Large businesses had successfully sued the Internal Revenue Service to recoup the taxes they paid. Phone companies also wanted the tax abolished to relieve them of having to collect it.
Originally a luxury tax to help pay for the Spanish-American War, the 3 percent surcharge had been calculated based on the length of the call and the distance of the connection. But as unlimited long-distance calling plans became commonplace, and the tax was applied to a flat monthly fee, some taxpayers argued that the tax no longer applied to them because the duration and distance of a call were irrelevant.
Though the tax will still be levied on local phone service, the government will reimburse three years' worth of taxes on long-distance calls, including any plans that combine local and long- distance calling. Consumers, who pay about 40 percent of the taxes collected, typically pay about $18 a year in excise taxes if they have a long-distance service and a cellphone.
They will be able to file for a refund on their 2006 U.S. income tax returns.
"It's time to disconnect this tax and put it on the permanent do-not-call list," Treasury Secretary John Snow said.
The decision, he added, "marks the beginning of the end of an outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history."
The abolition of the tax, effective July 31, will cost the Treasury $5 billion annually in lost revenue in the next few years. With budget deficits soaring, the Treasury had been slow to scrap the tax. But several federal courts ruled in recent years that it was no longer applicable to customers with unlimited long-distance plans.
The Internal Revenue Service has refunded hundreds of thousands of dollars in taxes to companies including OfficeMax and the American Bankers Insurance Group based on those court decisions.
While the courts said some businesses should get refunds, Congress had not repealed the tax, so the IRS was compelled to continue collecting it. This created a peculiar situation in which taxpayers who won refunds still had to pay the tax in subsequent years and then apply for another refund.
I have to remember not to throw out my phone bills, so I can get a refund.
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