WASHINGTON-The wireless industry, joined by the rest of the telecommunications industry, last week asked the Treasury Secretary to intervene and stop the Internal Revenue Service from continuing to collect the 3-percent tax on talking.
“The IRS’ issuance of broad and inclusive guidance that comprehensively addresses long distance, wireless and Voice over Internet Protocol services will prevent further costly and unnecessary litigation and will limit the amount of tax refunds that the government eventually and inevitably will be required to pay,” reads a letter sent to John Snow, the Secretary of the Treasury. “We urge your prompt attention to this matter. Thank you in advance for making every effort to serve and protect the interests of all American taxpayers.”
The letter comes in the wake of another ruling against the IRS. The U.S. Court of Appeals for the 6th Circuit agreed with the 11th Circuit that the tax cannot be collected on calls that are billed only by time and not time and distance. The 6th Circuit covers Kentucky, Michigan, Ohio and Tennessee. The 11th Circuit covers Alabama, Florida and Georgia.
The wireless industry is not directly impacted by the two decisions because tax decisions only impact the affected parties that sued.
After the 11th Circuit decision, the IRS did not follow through with an expected appeal of the case to the U.S. Supreme Court. Instead it said that all telecom carriers should continue assessing and collecting the tax. The telecommunications industry urged Secretary Snow to direct the IRS to drop any plans to appeal the 6th Circuit case.
The 6th Circuit did not speak with one voice, with Judge John Rogers dissenting in the 2-1 ruling. Rogers said the law was ambiguous enough that IRS interpretation should be followed. “We should not encourage lawyers to play word games at the expense of the public finances,” he wrote.
The IRS believes the tax on talking is legal due to language adopted in 1965 that says calls made through the wide area telecommunications system can be taxed.
While the telecom industry waits for the courts to act, it continues to press Congress to eliminate the tax. Bills are now pending in the House and Senate to repeal the tax.
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 legislation. Despite industry and legislative backing for the tax’s elimination, it’s a tough sell because the tax is not earmarked and can be used to reduce the federal deficit. Last year, there was even talk of raising the tax to 4 percent.
