Court rules federal excise tax on cell phones illegal
The federal government owes wireless phone subscribers about $9 billion in tax refunds for the 3% federal excise tax charged on their bills, which was ruled illegal by a federal court today; however, the paperwork is likely to put off most people from filing for the refund, according to USA TODAY.
All told, three federal appeals courts have ruled that the federal excise tax, which began as a levy to fund the Spanish-American war, could not apply to telephone calls which were charged only by time, and not by distance.
The Bush administration has not decided whether to appeal the rulings, and in the meantime, the government can continue collecting the tax.
On Friday, a court in Washington, D.C., became the third federal appeals court since May to void the tax. Two other federal appeals courts, covering seven states, have ruled the tax unlawful, and cases are pending elsewhere in the nation’s 13 appeals courts. In all, nine federal courts have ruled that a 3% federal tax doesn’t apply to phone calls that are priced only by how long a person talks — not by how far the call travels.
That means cellular phones, Internet phone service and about one-third of long distance calls would be exempt from the tax. The wireless industry estimates that consumers would save about $4.5 billion a year. Taxpayers also would be due three years of refunds — about $9 billion.
The cellphone industry wants the tax removed immediately from bills and the money refunded. “Our customers shouldn’t be paying a tax that courts have repeatedly found illegal,” says Steve Largent, president of CTIA-The Wireless Association and a former Republican congressman. . . .
“It sounds absurd, but the law is written so that the government can keep collecting a tax even though it’s been ruled unlawful,” says Hank Levine, a lawyer representing businesses that challenged the tax. Federal law makes it nearly impossible to get an injunction to stop the government from collecting a tax, he says.
The average consumer would be entitled to a refund about the size of the average $49.52 monthly bill paid by the USA’s 195 million wireless subscribers. However, consumers would be required to seek refunds individually, documenting how much they paid each quarter in separate claims.
The time limit for refunds is three years. A person entitled to a $50 refund would have to fill out forms a dozen times to get the three years’ worth of refunds permitted under tax law. Collecting records and preparing the form would take about seven hours. — USA TODAY
Because the tax can only be legally applied to calls which are charged by distance, it cannot apply to most wireless, VoIP and long distance plans, which offer unlimited U.S. calling. It still applies to international calls, though.
It’s about damned time. In the meantime, until the IRS actually decides to abide by the decisions of the courts, to stop the tax collection, you can file a tax protester form with your wireless or VoIP provider.
