Telephone excise tax abolished, millions in refunds expected

Score one for the little guy - and the not-so-little guy. The U.S. Treasury Department abolished a tax law Thursday, which will likely result in multimillion-dollar refunds for business users.

It’s not surprising that the government finally capitulated, says Steve Shea, managing director at consulting firm TechCaliber. “But this is a big decision for business customers.”

Many business users started filing for refunds as long as three years ago, as the government debated this issue and it was dragged through litigation.

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Score one for the little guy - and the not-so-little guy. The U.S. Treasury Department abolished a tax law Thursday, which will likely result in multimillion-dollar refunds for business users.

It’s not surprising that the government finally capitulated, says Steve Shea, managing director at consulting firm TechCaliber. “But this is a big decision for business customers.”

Many business users started filing for refunds as long as three years ago, as the government debated this issue and it was dragged through litigation.

The federal excise tax of 3% on all long-distance calls has been on the books since 1898, but it is no more. According to the Treasury Department, the IRS will issue refunds to consumers and business customers for taxes paid over the past three years in their 2006 filings.

“The most savvy enterprise customers have already filed their claims, but there are plenty who have not. They need to get that done now,” Shea says. He points out that those who have filed for refunds as long as six years ago could be looking at multimillion-dollar refunds as long as they’ve kept their claims up to date.

The Treasury says that due to the statue of limitations, refunds filed today can only cover the past three years.

According to Treasury, the excise tax was originally established as a luxury tax on wealthy Americans who owned telephones back in the day.

A question enterprise users need to ask their carriers today is, when will they remove the tax from their bills? And despite what the carriers say, customers must be diligent about watching future invoices to be sure the tax is removed.

The next step is to eliminate the same tax on local calls. The Treasury Department is urging Congress to step in and abolish that tax.