Treasury: Telephone tax refund for everyone
Treasury Dept. concedes a Spanish-American War tax on long-distance service is antiquated and consumers are entitled to a refund.
NEW YORK (CNNMoney.com) - After losing several court battles, the U.S. Treasury on Thursday said it would provide refunds to consumers for a federal excise "luxury" tax on long-distance service, the origins of which date back to 1898 to help pay for the Spanish-American War.
The refund will apply to the 3 percent excise tax billed to them on long-distance service since Feb. 28, 2003 and will include interest. Consumers will be able to claim it on their 2006 tax returns, which they will file in 2007.
"Today is a good day for American taxpayers; it marks the beginning of the end of an outdated , antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history," said Treasury Secretary John Snow in a statement.
"The Federal Appeals courts have spoken across the board. It's time to 'disconnect' this tax and put it on the permanent 'do not call' list," Snow added.
The tax was passed in 1898, when there was no federal income tax and telephone service was something that only the rich had access to. It was designed as a luxury tax to help the government during a time of high military spending.
Since then, it has become a good revenue generator for the Treasury, raising $5.9 billion in 2005.
An excise tax is also levied on local service, but that will not be refunded. However, both Snow and Senate Finance Committee Chairman Charles Grassley (R-Iowa) said Thursday they would like lawmakers to abolish the excise tax in its entirety.