Friday, February 25, 2005

We're all another court case closer to $6 billion in telephone tax refunds.

We now have a fifth federal court decision holding that the federal tax on long-distance telephone service is being collected illegally by the IRS in many, if not the great majority of, cases these days.

This time the refund is more than $1.25 million, and once again -- as in three of the other cases -- the decision is by summary judgment, meaning the court decided the IRS didn't even have an argument worth listening to at a full trial. [Honeywell International, Inc. v. U.S., No. 03-1915T, Court of Claims]

Once more the court gave the IRS a lecture about how "and" does not mean "or" -- explaining that the Tax Code imposes a tax on long distance calls that are individually billed by time and distance.

In today's world few long-distance plans bill like that any more. However the IRS has nevertheless continued to tax all calls on the logic that Congress intended to tax all calls, deducing that therefore the word "and" in the Tax Code has evolved over time to come to mean "or", so it can tax calls billed either by time or distance -- an argument that the courts have thus far found unpersuasive.

While the big companies are fighting this out with the IRS the same logic applies to everybody's tax bill. If you have a small business, or even significant personal long-distance charges, it may pay to protect a refund claim for yourself.

Full references to the other cases and to legal analysis that can help your tax advisor do this for you (you really can't do it yourself unless you are a tax professional) were given previously.

People in the industry say refunds could total $6 billion and growing. Go claim your share!