concedes telephone tax fight, promises refunds
By News wire reports
Rocky Mountain News
Thursday, May 25, 2006
The Treasury Department said Thursday it will eliminate a
tax on long-distance telephone calls and refund about $13
billion collected from callers. "Itís not often you get to
kill a tax," said Treasury Secretary John Snow.
Companies have been fighting the tax in court and winning,
arguing that the 3 percent excise tax should not apply to
some long-distance calls. Snow said the government would
stop fighting those taxpayers challenging the tax.
The tax will officially disappear on July 31.
"It wasnít the governmentís money. They were
inappropriately collecting it," said Sen. Rick Santorum,
Individuals will be allowed to claim refunds on their 2006
tax returns, filed in 2007, for taxes paid on long-distance
telephone calls since March 2003.
Taxpayers can calculate the actual taxes paid and apply for
a refund, or they can claim a standard amount that will be
set later by the Treasury Department and Internal Revenue
Snow said the government does not know how much money
individual taxpayers can expect to receive, but the Treasury
expects to return $13 billion to individuals, businesses and
others who paid the tax.
It typically amounts to a few dollars on the average
consumerís telephone bill.
"Almost everyone is sick of being nickel and dimed," said
Sen. Charles Schumer, D-N.Y., praising the end of the tax.
Individuals who do not have to file a tax return will be
instructed to use a special form to apply for the refund.
Businesses would be required to calculate the taxes they
paid before requesting their money back.
The federal excise tax on local telephone service remains in
effect, but Snow said the administration would support
legislation in Congress to terminate that tax as well.
The Congressional Budget Office has estimated that the
government expected to collect $52 billion over a decade
from telephone excise taxes, including charges on local and
Snow said the government can handle the reduction in tax
revenue, despite persistent federal budget deficits.
"Federal revenues are surging," he said.
The tax dates to 1898, when telephones were a luxury and
lawmakers needed money to fight the Spanish-American War.
It imposes a tax on calls billed according to distance and
duration. Businesses fighting the tax in court had argued
that many modern billing plans ignore the distance of
telephone calls, and the tax should be declared invalid.