[asterisk-biz] FW: [isp-clec] Treasury disconnects tax on long-distance calls - with refunds

[Brian C. Fertig]

FYI

Brian Fertig


Treasury disconnects tax on long-distance calls

WASHINGTON (MarketWatch) - The brief Spanish-American War ended more
than a 
century ago, but not the federal tax assessed to fund the victory.
Until now.

On Thursday, the U.S. Treasury said it would stop collecting the 3%
federal 
excise tax on long-distance calls, a fee originally assessed in 1898.
The 
government also said it will issue refunds requested by consumers and 
businesses that paid the fee over the past three years. Taxpayers will
be 
able to request refunds when they file 2006 tax returns in early 2007.

The Treasury also said the Justice Department would cease litigation in 
support of the tax after a handful of federal appeals courts ruled the
fee 
illegal in decisions rendered within the past year. The most recent loss
in 
federal court occurred earlier this month.

"The Federal Appeals courts have spoken across the board," Treasury 
Secretary John Snow said in a statement. "It's time to 'disconnect' this
tax 
and put it on the permanent 'do not call' list."

The tax, which generates more than $6 billion annually, has survived 
repeated efforts to eliminate it, most recently in 2000, when President
Bill 
Clinton vetoed a larger bill that included a repeal of the excise fee.
Bills 
aimed at ending the tax have circulated every year since.

For decades, long-distance companies such as AT&T Inc. have been
required to 
collect the excise fee from customers and pass it on to the federal 
government. Yet some large corporations such as Hewlett Packard
successfully 
sued to get rid of the tax, claiming it was illegal. Others have won
large 
refunds from the IRS.
The excise tax works out to $1.50 per every $50 in long-distance calls,
not 
a particularly large sum for consumers. Yet for a business that spends,
say, 
$10,000 a month on long-distance calls, the tax would equal $300 a month
or 
$3,600 a year.

If the tax remained in place over the next decade, it would have
generated 
about $67 billion for the federal coffers, a congressional panel
estimates. 
Altogether, the excise has raised more than $300 billion in its entire 
existence, the Congressional Research Service found.

The excise fee was originally established in 1898 on long distance
because 
phones were considered a luxury and only the wealthiest Americans could 
afford service. These days, the tax affects all consumers directly or 
indirectly, no matter what their annual income. In announcing his
decision, 
Treasury Secretary Snow also called on Congress to eliminate federal
taxes 
on local phone calls. That tax is separate from the long-distance fee.



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