And you thought that the Treaty of Paris (signed on December 10, 1898) ended the Spanish-American War. No! It ended today, May 25, 2006, when the Department of the Treasury announced that they will no longer fight for enforcement of the 3% telephone excise tax used to fund the Spanish-American War.
Refunds of tax for long-distance service paid over the past three years will be given as part of your 2006 tax returns filed in 2007. As to what documentation (if any) is required, this has not been announced. (From a tax preparers’ viewpoint, I hope that preparers aren’t the ones who will have to check that individuals requesting refunds meet the requirements….)
Additionally, the press release and the news stories do not reference mobile telephone service (e.g. cellular). However, the IRS notice does, stating,
“These cases [on the telephone excise tax] hold that a telephonic communication for which there is a toll charge that varies with elapsed transmission time and not distance (time-only service) is not taxable toll telephone service as defined in § 4252(b)(1) of the Internal Revenue Code. As a result, amounts paid for time-only service are not subject to the tax imposed by § 4251. Accordingly, the government will no longer litigate this issue and Notice 2005-79, 2005-46 I.R.B. 952, which states otherwise, is revoked.”
So cellular phone service and long-distance service should be free of the excise tax.
Until the IRS and the Department of the Treasury announce the procedure for refunds, keep your old phone bills! The Treasury Department estimates that refunds will total $15 billion.
Links: Reuters News Story, Roth Tax Updates, and TaxProf Blog
Tags: TelephoneTax