Telephone Tax Remains Payable Despite Ongoing Litigation, US Government Warns

by Leroy Baker, Tax-News.com, New York

11 August 2004

The Treasury Department and the Internal Revenue Service on Monday issued a Notice to inform taxpayers that the IRS will continue to collect the communications excise tax as it always has, notwithstanding ongoing and conflicting litigation.

Under current rules, individuals and businesses paying for taxable communications services are required to pay the tax to their phone company together with their payment for the services. The phone companies then forward the taxes collected from their customers to the United States Treasury.

According to the authorities, failure to pay the tax to the phone company may result in the imposition of penalties and interest.

Taxpayers who believe, based on the ongoing litigation, that they do not owe the tax can preserve any rights they may have to a refund, without risking penalties and interest, by paying the tax to the phone company and filing a claim for refund with the IRS.

Current regulations require phone companies to report the failure of their customers to pay the telephone excise tax, but the regulations do not provide a date by which the report is due. Proposed and temporary regulations have been issued that provide that date.

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