Last May, after several appeals courts ruled that the 3% federal telephone excise tax does not apply to most long-distance service, the Treasury Dept. announced it would allow taxpayers to file for refunds on taxes on such calls from March 2003 through July 2006. Now the IRS has created a new form that includes a formula businesses can use to avoid having to comb through 41 months of old phone records.
This will be a significant simplification for many carriers, which are typically heavy users of long-distance phone service. Businesses can now calculate the federal tax charged as a percentage of their April 2006 phone bill, when the tax applied to local and long-distance service, and their September 2006 bill, when the tax applied only to local service. They will be entitled to a refund equal to the difference in the two percentages times their total phone bills over the March 2003-July 2006 period. Businesses that prefer to go through the details of each month's bill may still file for a refund of the actual tax on long-distance service during those months.