‘It’s time for the IRS to stop collecting this unlawful tax,’ UST...
“It’s time for the IRS to stop collecting this unlawful tax,” USTelecom said in response to a ruling by the 3rd U.S. Appeals Court, Philadelphia, that the telephone excise tax is unlawful. Five federal appeals courts, representing 13 states,…
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now have ruled against the tax on long distance calls. The courts have said the excise tax applies only to long distance services that vary both with transmission time and distance. That means it doesn’t apply to long distance services that are priced by time but not distance, which is the prevalent method now. The IRS has argued the tax actually applies to services that are based either on distance or time, but the courts have said the law applies excise tax only to services that vary by both factors. The 3rd Circuit ruled Tues. on a case involving Reese Bros., a company that purchased long distance services at fixed per- min. rates without any distance charges. The company had sought a refund from the IRS for $319,496 in excise taxes and, when the IRS didn’t respond, it filed suit. When a lower court ruled in favor of the company, the IRS appealed. “The question presented in this appeal is whether the federal communications excise tax… applies to long distance telephone services that are priced based on a fixed per- minute, non-distance sensitive rate,” the court said: “Based on the plain language and structure of the statute, we conclude that it does not.”