Re: Telephone 'Luxury' Tax Now Discontinued

The Treasury Department has, for many, many years, been charging a tax
> on telephone calls. They have been sued many times for it, amd I guess > the decision finally came down to not only quit charging it or trying > to collect it, but also to allow the essence of a 'class action' > lawsuit so that people who have paid that tax over the years can apply > for a refund. I think the way this will work is there will be a line > on your tax form next year allowing you to deduct as a credit whatever > had been paid on the telephone tax. I believe this tax began during > the Spanish American War, and like so many government things, it just > stayed on forever for at least a century.

The issue hinges on the tax on toll calls. Under the law establishing the tax, toll calls had to be defined, and were defined as a distance based charge -- what informally was called Long Distance. As long a distance was one component in the charge, minutes could also be used.

But in recent years distance has stopped being a factor and minutes became the factor in toll charges. Since the law stated toll calls were distance based, and that's just not the case any longer, first one federal circuit court, than another, and most recently the fifth federal circuit in a row ruled against the IRS. So the IRS finally caved in, and will allow all taxpayers who paid the 3% excise tax on toll calls to apply for a refund of this tax. The period is from the first court ruling in March 2003, until the final demise of this tax, June 30, 2006.

Talk to your tax people about the particulars of how to apply for a > refund, etc.

The IRS will be announcing how to claim the credit, which will be either the actual amount you paid if you have the bills, or a simplified method if not. That will be announced before next tax season.

For the past 10 years I have been a professional tax preparer, and am "so looking forward" to this new credit :-(

Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH