Federal telephone excise tax

The federal telephone excise tax is a statutory federal excise tax imposed under the Internal Revenue Code in the United States under 26 U.S.C. § 4251 on amounts paid for certain "communications services." The tax was to be imposed on the person paying for the communications services (such as a customer of a telephone company) but, under 26 U.S.C. § 4291, is collected from the customer by the "person receiving any payment for facilities or services" on which the tax is imposed (i.e., is collected by the telephone company, which files a quarterly Form 720 excise return and forwards the tax to the Internal Revenue Service).

Although in popular belief the telephone excise tax has been in place continuously since the Spanish-American War, it has actually been repealed and reinstated several times, usually in times of war or economic crisis. Because of this connection to war, the tax has been a frequent target of war tax resisters.

In late April 1898, Congress passed a resolution declaring that a state of war had existed since April 21, 1898, between the United States and Spain. Although the Spanish–American War was short, its financing needs resulted in a federal budget deficit. In the landmark case of Pollock v. Farmers' Loan and Trust Co. the Supreme Court had nullified the income tax of 1894. Many in Congress felt that tariff increases could create too much disturbance with industry. As a result, the leaders in Congress felt that the revenues required for military expenditures either should come from increases in existing domestic taxes or supplements of new taxes of the same type. Thus, in the War Revenue Act of 1898, an excise tax on telephone service was introduced for the first time in 1898. The tax was repealed in 1902, at the end of the Spanish-American related Philippine-American War.

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