Tax Development May 26, 2006
On May 25, 2006, the U.S. Treasury Department announced the end of the battle over the taxability of long-distance services. The IRS decided to concede the issue after several Federal Courts ruled in favor of the taxpayer in this matter. The IRS now agrees that the 3% Federal Excise Tax is not due upon telephone calls for which the toll charge only varies by time, and not by distance. The vast majority of toll telephone calls made today are billed only upon the basis of the duration of the call and not upon the distance between the individuals participating in the call.
In the announcement, Treasury Secretary Snow stated “The Federal Appeals Courts have spoken across the board. It’s time to ‘disconnect’ this tax and put it on the permanent ‘do not call’ list.” Secretary Snow also called on Congress to terminate the tax on all telecommunications services.
Refund opportunities continue to exist for all purchasers of these types of telecommunications services as well as similar services. The IRS will allow for a credit on the 2006 Federal Income Tax return for all amounts overpaid that are within the three-year statute of limitations. A detailed analysis of telecommunications purchases should be performed to ensure that your company receives the maximum amount of refunds due.