For over 100 years long distance telecom customers – businesses, consumers, and other entities alike - have been paying an excise tax of 3% on long distance calls. 3% too much, it turns out.

Recently, the IRS acted to end this antiquated tax, after several courts called it illegal.

Effective 8/1/06, the IRS will no longer collect the federal excise tax on long distance calls. As part of the repeal, tax payers will be able to file for an excise tax refund on long distance calls made over the last 3 years.

“The Telephone Tax” initially a luxury tax was launched in 1898 on those who could afford telephone service. Its proceeds were used to help fund the Spanish-American war which ended over a century ago.

It’s true that refunds will mainly impact large corporations with significant long distance bills. For example, The ServiceMaster Company won an $879,000 refund in a recent legal settlement.

But, every long distance tax payer can benefit in some way.

We at Cory want you to share some highlights of the excise tax repeal and show how it might impact you:

• The IRS will stop all collection of the 3% long distance excise tax from telecom companies beginning 8/1/06. This includes taxes on traditional long distance itemized charges, bundled long distance/local calls (where the local telephone service charge is not listed separately), wireless telephone calls, Voice over IP service, and prepaid telephone cards.
• Excise taxes on local calls are not repealed yet, but may be in the future.
• The “relevant period” for which tax payers can claim refunds is the timeframe after 2/28/03 and before 8/1/06.
• Claims for refunds must be made on tax payers’ 2006 tax return.
• The IRS is working on a simplified safe harbor method with limited documentation for residential long distance refund filers. The safe harbor refund amount is still under consideration and will be announced at a future date. Some industry experts expect it to be about $50 per consumer.
• Businesses and other entities will need to provide documentation of taxes paid in order to collect refunds.
• The IRS will issue specific guidance and potentially create specific refund forms, for partnerships, S Corporations, estates and trusts, tax-exempt organizations, and other entities. These have not yet been issued.
• The IRS will pay interest on refunded amounts to businesses and other entities, but apparently not to consumers using the safe harbor approach.
• The tax refund must be declared as income in 2007, to the extent the refunded amount reduced income taxes imposed.
• Taxpayers may alternatively make refund requests directly to their telecom companies, but these companies are not obligated to make refunds.
• Taxpayers cannot collect refunds from both the IRS and their telecom carriers.

At Cory Communications, we strive to provide information on industry developments that impact our customers. Due to the tax implications of the 3% excise tax repeal we recommend that you consult an accountant for specific details on the refund process and on implications for your particular tax situation.

In the April issue of the Cory Communicator, we endorsed Hosted Voice over IP (VoIP), as an entirely viable tool for telecommunications.

We want to reiterate our endorsement of this quickly emerging telecom option that uses IP (Internet Protocol ) instead of traditional phone lines to place calls. We believe today’s VoIP plans are great for residential use, businesses of all sizes, frequent travelers and remote workers.

Even individuals who simply like to try out growth technology are increasingly enrolling in VoIP to get a jump start and have some fun.

Cory has identified several excellent VoIP partners for our clients. FutureLink, in particular, is attractive for residential use and small to mid-sized businesses. Callers can enroll with a nominal equipment investment and they can keep their existing telecom service. This VoIP partner offers three attractive Business Plans*:

• $15.95 per month plus $.025 per minute of domestic calling
• $29.95 per month for unlimited local and regional calls plus $.025 per minute for long distance calls
• $39.95 per month for unlimited calling within the US and Canada

What makes these programs so attractive is an entire array of FREE features that would otherwise come at a price through most traditional carriers. Here are some of the NO-COST SERVICES that have shaped FutureLink into a plan truly worth looking into:

VoIP service requires broadband Internet access to place calls. The easiest way to enjoy this service and really get a good feel for how it operates is to make a minimum investment and purchase an IP Phone. (Cisco IP Telephone) This phone is easy to install. The connection goes from your LAN (Ethernet) jack into the back of the phone and from the back of your phone into your computer. This will allow you to use the new service and not interrupt any service you currently have. You’ll be issued your own private phone number which will allow you to use all of the features of the service and not interrupt your existing infrastructure or phone numbers.

Industry insiders say VoIP has the potential to completely rework the world’s phone systems – and this appears to be true.

If you want to learn more about enrolling in VoIP, or about our VoIP partners including FutureLink, please call us at 1-877-489-8186 or send an email to info@corycommunications.com.

*Residential Plans are also available. Call us to learn more.