Phone Card Retailers Usually Qualify for Telephone Tax Refund

Under the law, retailers and other businesses that sell prepaid phone cards for long-distance service usually qualify for the telephone tax refund.

The Internal Revenue Service today reminded these businesses to check their eligibility for this special refund before filing their 2006 federal income tax return. Normally, the phone card retailer, not the phone company that issues the card or the customer who uses the card, is responsible for paying the three-percent federal excise tax. As long as the phone card was not restricted to local-only service, the retailer is eligible to request the telephone tax refund.

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3 percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. Read more at irs.gov.