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Are You Still Paying for Telephone Service Tax?

Back in 1898, the US Federal Government decided to institute an excise tax on Long-Distance Telephone Services as a way to help pay for the Spanish-American War. The war ended, but the tax continued for 108 years. Now, after a series of challenges in various courts, the Government has decided to stop collecting the 3% tax on long-distance telephone services as of July 31, 2006.

 

Long-distance calls are now generally charged based on elapsed transmission time alone, not on the time and distance involved. Therefore, it was argued, charges paid for time-only services were not subject to the 3% excise tax on "long-distance" calls.

 

Numerous courts have agreed. As a result, individuals and businesses will be able to claim refunds on their 2006 income-tax returns for excise tax paid for services billed between February 28, 2003 and July 31, 2006.

 

The IRS has reported it will issue a safe-harbor amount individual taxpayers can claim so they don't have to collect all their old telephone bills to come up with an "exact" amount.