Verizon Stops Collecting Federal Excise Tax for Many Telecommunications Services

WASHINGTON - Verizon has ceased collecting the 3 percent federal excise tax on monthly consumer telephone bills for long-distance and bundled services, effective today, following a decision by the Internal Revenue Service. Customers will be able to obtain a refund or credit from the IRS on their 2006 federal income tax returns for the portion of the excise tax that was applicable to those services and that customers paid over the past three years.

The last portion of the tax, pertaining to only local telephone service, remains in effect. But Verizon and other telecom companies are urging Congress to repeal the tax in total this year.

"We have been working for years on behalf of our customers to eliminate this outdated and regressive tax," said Bob Ingalls, president, Verizon Retail Markets Group. "This is a good first step in alleviating consumers' telephone tax burden."

In May, the Internal Revenue Service conceded the long-standing legal dispute over the tax on long-distance service and decided to discontinue collection of the tax on long-distance services, as well as wireless, VoIP, prepaid telephone cards and other bundled services, effective Aug. 1.

The legality of the tax as it applies to certain long-distance services had been challenged successfully in five federal appeals courts. The tax was originally established in 1898 as a "luxury" tax on wealthy Americans who owned telephones. Proceeds were initially used to help fund the Spanish-American War, but have since gone into the general fund.

"Today's information age has made affordable communications services a necessity for everyone, no matter what his or her income level, and is part of the basic fabric of our social and economic life," Ingalls said. "Communications services have evolved into a vital infrastructure for technological advancements."

The IRS will offer a simplified method for individuals to use in claiming a refund for federal excise tax paid on long-distance services and bundled services billed after Feb. 28, 2003 and before Aug. 1, 2006. The IRS will provide further guidance on its Web site at www.irs.gov.

Verizon Communications Inc. (NYSE:VZ), a Dow 30 company, is a leader in delivering broadband and other wireline and wireless communication innovations to mass market, business, government and wholesale customers. Verizon Wireless operates America's most reliable wireless network, serving nearly 55 million customers nationwide. Verizon Business operates one of the most expansive wholly-owned global IP networks. Verizon Telecom is deploying the nation's most advanced fiber-optic network to deliver the benefits of converged communications, information and entertainment services to customers. Based in New York, Verizon has a diverse workforce of more than 252,000 and generates annual consolidated operating revenues of approximately $90 billion. For more information, visit www.verizon.com.