The Court’s guidance is needed to prevent the Internal Revenue Service from reviving a tax that was bad policy to begin with and was never intended to be a permanent tax, acknowledging recent court decisions and IRS rulings limiting the scope of the tax to local telephone service.Supreme Court, and the Tax Foundation filed a brief in support of the petition on May 21, 2014, requesting the Court to take the case.
Email or phone: Password: Forgot account Sign Up. WorldCom has appealed this decision to the U.S. IRSS will be providing Tax Return Filing Services to applicants who has worked in the USA both J1 and H2B. The federal Second Circuit Court of Appeals reversed, holding (1) that elements of the service could provide telephonic-quality communication, (2) that the IRS decision not to apply the tax to most communications services was not entitled to judicial deference, and (3) that to hold otherwise would produce “a strange result” of some services being taxed but not others. The Bankruptcy Court ruled for WorldCom, as did a federal judge, noting that the service was an intermediate service (not an end user service) and not telephonic-quality communication. The IRS contends that these services are “local telephone service,” while WorldCom argues that it is a communications service outside the scope of the statute. However, in 2007, the IRS demanded $16 million in back telephone excise taxes from bankrupt company WorldCom for data stream services related to its provision of dial-up Internet access in the early 2000s. The IRS no longer attempts to collect the tax on other telephonic communications, recognizing that the rest of the statute is a vestige of a bygone era.
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Technological advances and changes in telephone habits have rendered teletypewriter exchanges obsolete, and long-distance service is now priced on time or in bundled services, rather than the per-call time and distance defined by the statute.Īfter losing a series of court cases, the IRS conceded in 2006 that the only remaining relevant portion of the tax is the tax on local telephone service. The tax is imposed on (1) local telephone service, (2) long-distance telephone service where price varies by distance and elapsed time, and (3) teletypewriter exchange service. In all other respects, the substantive provisions of the federal excise tax on telephone service has not changed since 1966. Repealed in 1902, re-enacted in 1917, repealed in 1924, and re-enacted in 1932, the tax was “temporarily” extended a further 29 times until it was made permanent in 1990. In 1898, the United States went to war with Spain and enacted an excise tax on telephone service to help pay for it.