After a succession of federal courts ruled that the 3% federal telephone tax does not apply to flat-rate long-distance services, the Treasury Dept. announced on May 25 that it would refund taxes collected in the past three years. Bundled services, such as voice over Internet protocol (VOIP), that do not distinguish between local and long-distance calls, will also be eligible for refunds. However, purely local service will remain subject to federal tax unless Congress repeals the entire tax, as some members have suggested.
Treasury announced that it will publish a simplified refund procedure that taxpayers can use on the 2006 income tax returns that they file next year. Interest will be paid on refunds for taxes collected since February 28, 2003.