Opportunity to Secure Refund of Federal Excise Tax Payments

Companies purchasing communications services at wholesale as VoIP providers, prepaid card distributors, or those integrating communications as a component of their actual services may still be eligible for refund of the Federal Excise Taxes (“FET”) paid on those communications services between March 2003 and July 2006.  The 3-year anniversary will expire March 15, 2010 and all refund claims filed after this date will be forever barred.

Back in 2006, the Internal Revenue Service (“IRS”) established that to seek a refund of the FET, taxpayers should take a credit on their 2006 tax returns.  For those that did not do so in 2006, like some of our clients, the refund could still be sought by filing an amended return for 2006.  But the time to do this ends this March 15, 2010.

There are two ways to determine if FET was paid on communications services.  The easiest is to check invoices from the relevant time period (March 2003 to July 2006) and see if a line item exists for the Federal Excise Tax.  The tax is 3% of the amount of charges for the services provided.  The other way is more complicated, but can be done.  If no line item appears on the invoices, the law presumes that a percentage tax, like the FET, is included in the charges for service.

CLIENT ADVISORY

Due to the impending expiration of the 3-year Statute of Limitations on your ability to claim refunds for Federal Excise Taxes paid either in supplier(s) invoices or as imputed in charges paid to your supplier(s) from March 2003 through July 2006, we urge clients who purchased metered, long distance services during the relevant timeframe to investigate whether they may remain eligible for a refund from the IRS.In particular, we urge clients that provided Voice over IP services to check their invoice records, as we believe this “class” of service provider may have overlooked this refund opportunity when first announced. If you have already vetted this issue or previously filed for FET refunds in the past, you may disregard this Advisory.

If you have questions about the FET refund opportunity or concerns regarding other communications taxes, including sales, use, excise and other state & local transaction taxes, please contact Chuck Helein at chh@commlawgroup.com or by telephone: 703-714-1301.

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