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belgareth
12-13-2005, 10:20 AM
Cellphone rulings could mean billions in tax refunds By Dennis Cauchon, USA TODAY



Tue Dec 13, 2005

Phone customers are due $9 billion in tax refunds and a 3% cut in wireless phone and long-distance bills,

according to a series of federal court decisions.

But the federal

government continues to collect the tax and requires so much paperwork for refunds that only big corporations are

likely to benefit.

On Friday, a court in Washington, D.C., became

the third federal appeals court since May to void the tax. Two other federal appeals courts, covering seven states,

have ruled the tax unlawful, and cases are pending elsewhere in the nation's 13 appeals courts. In all, nine

federal courts have ruled that a 3% federal tax doesn't apply to phone calls that are priced only by how long a

person talks - not by how far the call travels.

That means cellular

phones, Internet phone service and about one-third of long distance calls would be exempt from the tax. The wireless

industry estimates that consumers would save about $4.5 billion a year. Taxpayers also would be due three years of

refunds - about $9 billion.

The cellphone industry wants the tax

removed immediately from bills and the money refunded. "Our customers shouldn't be paying a tax that courts have

repeatedly found illegal," says Steve Largent, president of CTIA-The Wireless Association and a former Republican

congressman.

The Bush administration has not said whether it will

appeal to the Supreme Court. "It's a matter subject to litigation, and that's all we can say," Treasury

Department spokesman Taylor Griffin says.

An appeals court decision

in May voided the law in Florida, Georgia and Alabama. The government did not appeal but continues to require phone

companies to collect the tax in those states and pass it on to the federal government.



"It sounds absurd, but the law is written so that the government can

keep collecting a tax even though it's been ruled unlawful," says Hank Levine, a lawyer representing businesses

that challenged the tax. Federal law makes it nearly impossible to get an injunction to stop the government from

collecting a tax, he says.

The average consumer would be entitled to

a refund about the size of the average $49.52 monthly bill paid by the USA's 195 million wireless subscribers.

However, consumers would be required to seek refunds individually, documenting how much they paid each quarter in

separate claims.

The time limit for refunds is three years. A person

entitled to a $50 refund would have to fill out forms a dozen times to get the three years' worth of refunds

permitted under tax law. Collecting records and preparing the form would take about seven hours.



"I don't think many people will make the effort," says Brad

Waterman, a tax attorney in Washington.

Big businesses would benefit

most from refunds, especially those with large international phone bills. Convergys, which operates call centers

around the world, has filed for a refund of more than $6 million. OfficeMax, a retailer, seeks $380,000.