TOP DRAWER ARTICLE

The End of the Phone Excise Tax
by
HL Carpenter

What would you call a temporary tax that has existed for one hundred and seven years? For many, words like outrageous, outdated or totally ridiculous come to mind.

Those words may be what five Federal Appeals Courts finally heard when they agreed the government should stop collecting the long distance telephone tax.

The tax on long distance telephone service, imposed in 1898 to fund the Spanish American war, was never repealed when the war ended less than six months later. Though many bills have been presented in Congress to abolish the levy, none was able to accomplish that purpose. Over the past decade the tax has remained at three percent, but during the Vietnam War it climbed as high as ten percent.

Some members of Congress were still supporting the tariff when the courts ruled against it and the Treasury Department decided not to pursue further litigation.

Businesses and individual taxpayers will now be eligible for refunds, with interest, for excise taxes paid on long distance telephone taxes over the last three years. Other fees and taxes on telephone bills are still in effect and are not a part of the court decision.

At present refund procedures are incomplete, but taxpayers will most likely be able to file a claim on 2006 income tax returns.

Originally published June 2006.

Last update: January 8, 2011