WASHINGTON-Even as wireless carriers won the right to stop collecting a 3-percent federal excise tax, they may be caught in the middle of a paperwork nightmare as customers try to collect government refunds.
Already, Verizon Wireless and Sprint Nextel Corp. said they would no longer collect the tax beginning in the June billing cycle. “As you well know, we’ve been beating the drum about the need to eliminate this tax-and other discriminatory taxes-on wireless consumers for, well, forever,” said Debra Lewis, Verizon Wireless spokeswoman.
Cingular Wireless L.L.C., the nation’s largest wireless carrier, said it “is doing the necessary systems work in preparation for turning off collection of the FET.”
The tax was first instituted in 1898 to fund the Spanish-American War. In the last year, the government has lost in five of the 11 federal appeals courts as businesses sued, claiming the tax could no longer be collected on telecommunications accounts that were not billed by time and distance. After its first loss last fall, the Internal Revenue Service told carriers to continue collecting the tax. Late last month, it gave up and told carriers that they no longer had to pay the tax after July 31.
The IRS is setting an estimated amount for customers to claim on their 2006 tax return and should announce the specifics later this year. For example, for a customer whose monthly bill is $50, their refund should total $55. But if the government’s number comes in below that amount, customers may want to opt for the entire refund they believe they are owed.
In order to do that, they must present documentation.
“These records should include bills from the collector that show the amount of tax charged for nontaxable service for each month during the relevant period and receipts, canceled checks, or other evidence that the amount requested was actually paid,” according to IRS guidance.
No problem for customers with three years of wireless billing records. But what about customers who pay their bills online or don’t have ready access to three years worth of wireless bills?
Verizon Wireless has said it “would take tremendous resources” to help their customers collect the necessary data. The nation’s No. 2 carrier allows customers to view bills online for free for six months but charges for older bills.
Cingular customers can access bills back to January 2005.
T-Mobile USA Inc. does not charge to get copies of back bills.
Sprint Nextel spokesman Travis Sowders said the carrier is waiting for more information. “Once those details have been released we will be seeing how that aligns with our current business practices,” Sowders told RCR Wireless News.
In addition to saying the administration would no longer defend the federal long-distance phone tax, Treasury Secretary John Snow said the White House plans to support a bill sponsored by Sen. Rick Santorum (R-Pa.) to remove the 3-percent tax on local telephone services.
Notwithstanding the Department of Treasury’s claim to stop collecting this tax, one conservative pundit said another administration could reinstate the tax unless Congress passes pending legislation to remove the tax officially.
“The story isn’t over here; there is an end to collection, and it is a logical outgrowth of court rulings, but I suspect a new administration could resume collection. We need Congress to formally repeal this tax,” said Patrick Ross, senior fellow and vice president of communications & external affairs at the Progress & Freedom Foundation.
The wireless industry has lobbied unsuccessfully to kill the tax since the late 1990s, coming close in the waning days of the Clinton administration when both houses of Congress passed versions of the legislation only to have the president veto it.
