It was a good day for telecommunications consumers on Thursday as the U.S. Treasury Department announced that it is settling with some large companies who have challenged the legality of the Federal Excise Tax that most U.S. telecommunications consumers have paid for years as a part of their long distance and wireless phone bills. The tax, usually shown as 3% of local toll, intrastate, interstate, and international long distance call charges, has been in existence in various forms since the 1898 Spanish-American War, when it was instituted as a luxury tax on the rich.

    Initially, the 3% reduction will only be applicable to long-distance bills. Consumers will be able to apply on their 2006 tax returns for refunds for all Federal Excise taxes paid since February 28, 2003, including interest. However, Congress is expected to pass a law that will rescind the 3% charge on local phone bills later this year. It is estimated by the FCC that the typical American household may qualify for an additional $55.09 refund on their 2006 tax returns as a result of this action (assuming an average bill for long distance and wireless service was $51 per month, or $612 per year ($1,836 over a three-year period). As such, the typical American household may qualify for an additional $55.09 refund on their 2006 tax returns as a result of this action.