Telephone tax refund

Scott Tong May 25, 2006

KAI RYSSDAL: We’ll go back more than a hundred years for story number two today. To the Spanish American war. And a telephone tax the government passed to pay for that war. Today the IRS said enough. Taxpayers are off the hook. Won’t have to pay anymore. And might even get refunds. But Marketplace’s Scott Tong reports the turnaround is not all altruism.

SCOTT TONG: The tax on long-distance calls was born in July 1898 — five months after the USS Maine exploded, and the war was on. Since then, the levy has come and gone.

RUTH BENN: It’s historically been attached to war.

Antiwar activist Ruth Benn says the phone tax resurfaced in World War I.

BENN: And then it was taken off and put back in World War II. And, uh, raised during the Korean War also.

She’s refused to pay the tax for 20 years. Big companies have had their own beef. OfficeMax and Hewlett Packard have sued the IRS, and won. They argued the tax is obsolete because it’s based on a fee that the phone companies stopped charging years ago.

Today the Feds announced taxpayers can seek refunds on the tax on their 2006 returns.

Harold Furchtgott Roth, the former telecom regular, says it’s worth it for businesses.

HAROLD FURCHGOTT ROTH: Large corporations will have kept very good records of their long distance calls over the past several years. And those probably add up to a fair amount of money.

Should individuals collect? Maybe, if you chat a lot. We’re talking 3 percent of long distance charges.

One group that is happy: the phone companies. Telecom lawyer Mitchell Brecher:

MITCHELL BRECHER: When a telephone company charges a tax, all it’s doing is collecting they tax on behalf of the government. It’s acting as a collection agency, if you will. There’s no secret telecommunications companies have been criticized for the amounts of taxes that have appeared on their bills.

For the government, not collecting the tax means about $67 billion in lost revenue over the next 10 years.

In Washington, I’m Scott Tong for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.