The IRS Has Issued Updated Instructions for Applying for Federal Telephone Excise Tax Refund

On May 25, 2006, the Internal Revenue Service announced that it would stop collecting the federal telephone excise tax on long distance and bundled telephone services and that instructions for refunds would be issued. For many local governments, this announcement was a "non-event" because they had long ago filed a certificate(s) with their telephone service providers, claiming an exemption from this tax under IRC 4253(i).

However, if your jurisdiction was paying the tax, you should file for a refund. Here are the instructions the IRS issued on March 1, 2007. The instructions say the refund should be requested for the entire period on one form and the form should be filed with the IRS during calendar year 2007. Then it gives specific statutory deadlines for the four quarters of 2004, with the requirement that the refund request for the first quarter of 2004 be filed by April 30, 2007. So it appears that the best thing to do is to apply for a refund for the entire period by April 30, 2007. Note that the IRS has not provided a "CRN," so we guess you leave that box blank.

What about federal excise taxes on local telephone service?

The IRS is still collecting that tax. However, local governments are exempt from that tax if they file an exemption certificate with their provider of local telephone tax service. You can call your local service provider and request a form or you can use the sample provided by the IRS. It appears that if you want to request a refund for taxes paid on local service, you will need a different Schedule 6 because the dates for the refund will be different than those for the tax on long distance service. If we are reading the IRS memo correctly, you can ask for a refund for taxes paid on local service for the period after December 31, 2003.

We at MRSC are not experts of any sort in IRS matters. But, we can tell you that we know some jurisdictions have filled out Form 8849 in the past to claim a refund and no one has ever reported any problems. It may take a while to get your refund because the volume of requests is surely going to be higher than the IRS has experienced in the past.