Academic journal article Journal of Accountancy

Court Hangs Up on Phone Tax Refund

Academic journal article Journal of Accountancy

Court Hangs Up on Phone Tax Refund

Article excerpt

The Court of Federal Claims held that the statute of limitations applies to taxpayers who paid the telephone excise tax through carriers and were not required to file returns related to it.

Until May 2006, the IRS contended that telephone toll charges that varied only with elapsed time but not distance were subject to the 3% federal excise tax. It had been instructing carriers to collect and remit the tax. Then the IRS conceded that time-only charges were not subject to the tax under IRC [section] 4252(b)(1) and set up a refund mechanism; however, Notice 2006-50 stated that only taxes collected for services billed between Feb. 28, 2003, and Aug. 1, 2006, were subject to refund.

RadioShack purchased long-distance service from carriers from Jan. 1, 1996, until July 31, 2006, and paid communications excise taxes on it. Because it paid the tax directly to its carriers and those carriers then remitted the tax, RadioShack was not required to file returns for it.

In October 2006, RadioShack filed a refund claim for the taxes paid during the first quarter of 1996. The IRS denied the claim because it was not filed within the period required under section 6511(a): "Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return" must be filed within three years of the return's filing or two years from when the tax was paid, whichever is later. …

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