TAX FILE: Courts nix long-distance phone tax

For the fourth time in recent months, a federal court ruled that a taxpayer was not liable for the 3% federal telephone tax on long-distance service. On November 30, 2004, the District Court for the Western District of Pennsylvania ruled that Reese Brothers Inc. was entitled to a refund of taxes it had paid on service that did not vary by distance. The ruling adopted the same reasoning as the courts for the Northern District of Ohio, which ruled in favor of a refund claim by OfficeMax; the Southern District of New York, which ruled for Fortis Inc.; and the District of Columbia District, which found in favor of Amtrak.

In contrast, the Southern District of Florida sustained IRS, which had turned down a refund claim by American Bankers Insurance Group. Until Congress or the Supreme Court explicitly tells the IRS to back off, carriers may have to fight to get the tax refunded.