US scraps long distance tax

Posted on May 31, 2006  /  1 Comments

by Patrick Neighly – 26/5/2006 04:40:00
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The US Treasury has scrapped a 3 percent federal excise tax on long-distance calls and promised taxpayer refunds covering the past three years. The move follows a series of federal appeals court rulings against the government, which had tried repeatedly to preserve the US$6 billion generated annually by the tax.

“The Federal Appeals courts have spoken across the board. It’s time to ‘disconnect’ this tax and put it on the permanent ‘do not call’ list,” quipped Treasury Secretary John Snow. The tax was in force for over 100 years after the end of the Spanish-American War it was enacted to fund.
Snow said he hoped excise taxes on local calls would be next to go. “It’s not often you get to kill a tax, particularly one that goes back so far in history,” he said, claiming that government coffers widely considered to be overburdened “can easily absorb” some $13 billion in expected tax refunds.
Snow declined to forecast how refunds would shake out among businesses and consumers, who pay roughly $1.50 in excise taxes per $50 spent on long-distance calls. A report in the Wall Street Journal pegged long-distance excise tax refunds and lost revenue at $60 billion through 2011.
Long-distance carriers including BellSouth praised the move. “The government’s announcement on the significant curbing of the Federal Excise Tax on talking is wonderful news for consumers,” said vice president of governmental affairs Herschel Abbott. “Customers should see a noticeable difference in their phone bills within the next few months. We hope this decision is a harbinger of removal of other discriminatory taxes on communications customers.”
Meanwhile, the US House Judiciary Committee yesterday voted to ban the $12 billion Internet gambling industry. The proposed law would prohibit interstate gambling in the US as well as paying gambling operations via checks, wires, credit cards or Internet transfers. The measure affects more than 2,300 Internet sites – including overseas businesses – and requires banks to block electronic payment to such operations by consumers. “The legislation is badly needed because … the amount of money going to these illegal unregulated offshore enterprises has quadrupled,” said bill author Rep. Bob Goodlatte.
“In the United States, gambling is essentially illegal unless regulated by the states,” he added. “This is a measure to work through that to make sure that the states are indeed protected in their right to continue to regulate gambling.”

1 Comment

  1. The IRS has announced that it will stop collecting the federal excise tax on long distance telephone services.The agency announced last Thursday that the tax does not apply to long-distance service as it is billed today. The tax was first imposed in 1898 to help pay for the Spanish-American War. The current rate of 3% is charged on the service amount.
    Taxpayers will be able to receive a refund of all excise taxes paid on long-distance services billed since Feb. 28, 2003. Interest will also be paid on these refunds. The IRS will soon announce a simplified method that taxpayers may use to minimize administrative burden.