Excise Tax Repealed - Finally!
The federal excise tax on long distance calling will be repealed and the IRS will refund three years worth of the taxes to consumers and businesses, the U.S. Treasury Department said Thursday. The tax has been around since 1898, when it was levied to help pay for the Spanish American War. (See Excise Tax Excised?)
The agency says the IRS will dispense the refunds -- with interest -- as part of 2006 tax returns filed in 2007.
The IRS has directed the phone companies to stop collecting the tax as of July 31, 2006, Light Reading has learned. Treasury Secretary John Snow said the cost of refunding taxpayers for three years of past taxes would come to around $13 billion.
Thursday's repeal applies only to taxes paid on long distance services. But Snow also issued a call to Congress to “terminate the remainder of this antique tax by repealing the excise tax on local service as well."
The excise tax was originally levied in 1898 as a "luxury" tax on wealthy Americans who owned telephones.
"Today is a good day for American taxpayers; it marks the beginning of the end of an outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history,” Snow said in a statement Thursday.
Both wireless and wireline carriers were applauding the decision Thursday. The carriers have been responsbible for collecting the tax on behalf of the government, recieving a small stipend for collection costs.
"This is welcome news for all communications customers, consumers and businesses -- and something we've worked to support for a long time," says AT&T spokeswoman Teri Rucker.
No less than 16 lawsuits had been filed during the last five years by consumers and businesses calling for the repeal of the tax. IRS attorneys had been defending them for some time. Ultimately, five Federal Appeals courts issued statements to the Treasury Department saying that the tax should be stopped.
"The Federal Appeals courts have spoken across the board," Snow said in the statement. "It's time to 'disconnect' this tax and put it on the permanent 'do not call' list."
— Mark Sullivan, Reporter, Light Reading