Tuesday, May 30, 2006

Spanish-American War Tax to End

The Washington Post reports:

The Treasury Department, conceding that it has no right to continue collecting a 108-year-old tax on long-distance telephone calls, announced [Thursday] that it will drop its legal battle for the tax and instead refund about $13 billion to callers who have paid the tax in the past three years.

The 3 percent tax, enacted in 1898 to help pay for the Spanish-American War and revised in 1965, has been declared illegal by five federal courts of appeal during the past year as the result of challenges brought by companies forced to pay it.


Treasury Secretary John W. Snow yesterday called it "an outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history."

The tax, which was originally considered a luxury tax because only wealthy people had telephones at the time, will go out of existence July 31.

Refunds will be limited, but not very difficult to obtain:

Snow said the taxpayers will be able to claim three years' worth of the telephone tax, the legal limit on claiming tax overpayments, on their 2006 tax returns. The Internal Revenue Service, he said, is working on a simplified method by which taxpayers can claim their refunds.

It is expected that, as with sales-tax deductions, taxpayers will be allowed to claim either a standard amount or an exact amount based on their phone bills. Individuals who are not required to file tax returns will be offered a special form for the rebate.


Snow noted that a similar levy on local calling remains in effect, and he called upon Congress "to terminate the remainder of this antique tax by repealing the excise tax on local service as well."

Apparently, the tax was ruled illegal as collected because it "applies only to calls priced on distance, not the length of the conversation, a restriction that should exempt most Internet phone service and cellular calls."

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