Rapid Changes to U.S. Excise Taxes on Long-Distance Telephone Services

Two recent court decisions regarding the federal excise tax paid on long-distance telephone service may affect large corporations. Most large corporations, with the assistance of the Big Four accounting firms or telecommunications consulting firms, have filed claims with the Internal Revenue Service (IRS) seeking a federal excise tax refund. In January 2004, two U.S. district courts reached opposite holdings on the issue. The U.S. District Court for the Southern District of Florida ruled that the taxpayer, the American Bankers Insurance Group, was not entitled to a refund of the tax, while the U.S. District Court for the Northern District of Ohio ruled that OfficeMax was entitled to a tax refund. At least seven other similar cases are pending.