Cell Phone Users May be Eligible for Federal Excise Tax Refund

A federal appeals court in Washington D.C., in December, became the third appeals court to void the federal excise tax on telephone services which are billed only by time, and not by time and distance, USAToday reports. The excise tax, originally levied to support the Spanish-American War, was last amended in 1965, when the statutory definition of long distance charges became “time and distance”, according to technology-reports.com. The government has argued that the intent of the law is to tax all commercial long distance. Tax on local service is not affected by the rulings.

To date, the administration has not appealed any of the decisions to the Supreme Court, but continues to require phone companies to collect the tax, usually 3 percent of the user's bill.


Thousands of executives with financial reporting responsibilities use the Comperio on-line library to access the type of information and interpretive guidance PricewaterhouseCoopers' own professional audit staff use around the world. Key content areas include guidance from the FASB, EITF, PCAOB, SEC, and others as well as PwC's interpretive guidance. Get more information and sign up for a complimentary 30-day trial.

The court decisions apply to most cell phone service, internet phone service and some long distance services, and could potentially support refund requests of up to $9 billion, according to USAToday. The IRS has been settling some refund claims by Fortune 500 companies at the 30-40 percent level, technology-reports.com says, but is currently waiting to see how the issue plays out in the courts, and may end up paying dollar for dollar in refunds.

Consumers should consider that the statute of limitation on these types of claims is three years, technology-reports.com says, and that should put a premium on filing for a refund now. Most individual cell phone customers would probably be entitled to a refund of $49.52, but businesses could collect much higher sums. Convergys, which operates call centers around the world has filed for a $6 million refund, and OfficeMax has successfully challenged the IRS for $380,000 in Cleveland, USAToday reports. The government is appealing this case.

Taxpayers who decide that it is worth the time to collect and analyze their phone bills should file IRS Form 8849 “Claim for Refund of Excise Taxes”, available in pdf format on the IRS web site, and IRS Form 8849, Schedule 6, “Other Claims". The taxpayer must fill out a separate Schedule 6 for each of the quarters in the three-year period for which he is requesting a refund.

A few years ago the House of Representatives voted to repeal the excise tax, news.zdnet.com reports, but the Senate never took the matter up. Now, a congressional subcommittee has suggested extending the excise tax to “all data communications services”, including broadband, dial-up, fiber, cable modems, cellular and DSL links. The IRS and the Treasury Department have said they are considering applying the tax to Internet phone calls, zdnet.com reports.

The wireless industry is preparing its own lawsuit to recover taxes it considers were wrongly collected from users, but eliminating the excise tax will be difficult, RCR Wireless News reports. The tax is popular with Congress and the administration because it is not earmarked and can be used to pay down the deficit.

You may like these other stories...

Event Date: May 29, 2014 In this presentation Excel expert David Ringstrom, CPA brings you up to speed on the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both...
No field likes its buzzwords more than technology, and one of today's leading terms is "the cloud." But it's not just a matter of knowing what's fashionable. Accounting professionals who know how to use...
There is a growing trend of accountants moving away from traditional compliance work to more advisory work. Client demand is there, but it is up to the accountants to capitalize on that. What should accountants' roles be...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.