United States: United States: IRS Reviews Federal Excise Tax

Originally published July 20, 2004

On July 2, 2004, the IRS published a notice in the Federal Register ("Notice") announcing that it was opening a proceeding to study the applicability of the Federal Excise Tax ("FET") to current communications services.

The Notice states that the FET, under the definition adopted in 1965, applies to communications services. However, the IRS indicates that various changes have occurred in the telecommunications industry in the past several years which have resulted in some uncertainty over precisely which services will be covered by the FET. Presumably, the increased use of VoIP services will be a major factor in the new proceeding. As the Notice states, "As a result of these changes, questions have arisen concerning the application of section 4251 to certain communications services that were not available in 1965. In response to these questions, Treasury and the IRS are considering proposing regulations that would revise the existing regulations to reflect changes in technology."

The IRS is requesting comments from any interested persons. Comments should describe the various technologies, services, and methods of transmission currently available for transmitting data and voice communications and how they should be treated under current law. Commentators should feel free to use this proceeding to voice their opinions, not only about new technologies such as VoIP, but the applicability of FET to switched telecommunications services that may be billed in ways that are arguably not subject to the FET.

A copy of the Notice can be viewed at the following link:
http://a257.g.akamaitech.net/7/257/2422/06jun20041800/edocket.access.gpo.gov/2004/04-15125.htm.

If you are interested in commenting in the proceeding, please contact us.