For Immediate Release

January 12, 2007

IRS Repeals Federal Excise Tax on Long-Distance Calls;
Customers Can Apply For Refunds on 2006 Tax Returns

Starting July 1, 2006, Chesnee Telephone Company no longer charges the 3% federal excise tax on long-distance charges.  The tax is still applied to other charges that pertain to local service-only according to a ruling by the Internal Revenue Service (IRS).  Customers will be refunded for the excise tax applied to long-distance charges from February 28, 2003, to August 1, 2006.  Customers will be able to apply for a refund from the IRS on their 2006 federal income tax returns.  You will not receive any refunds from Chesnee Telephone Company.

Individual taxpayers can apply for a standard refund amount between $30 and $60 (depending on the number of exemptions claimed) in order to alleviate the need to gather old phone bills. By choosing the standard amount you will only need to fill out one line on your tax return. The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects the taxes paid on long-distance or bundled phone service by similarly sized families or households.

The IRS has developed a formula that most businesses and tax-exempt organizations can use to figure their refund. To use the formula, businesses need only review their phone bills for two months (April 2006 and September 2006), instead of all 41 months included in the refund period. In addition, businesses will need to know their total telephone expenses for the 41-month period and the number of employees reported on their federal withholding tax return (Form 941) for the second quarter of 2006.  For each bill, the business/organization will divide the amount of the FET included on the bill by the total bill amount to obtain a September bill percentage (this is representative of bills for which the tax was applied only on local charges) and an April bill percentage (that is representative of the period for which the FET was applied on both local and long-distance).  The business/organization then subtracts the September bill percentage from the April bill percentage to obtain a long-distance tax percentage and applies this percentage to the telephone expenses listed on its quarterly or annual tax returns for the period between February 28, 2003, and August 1, 2006, to determine the refund amount.  The refund amount is subject to a 2% cap for companies with 250 or fewer employees and 1% for companies with more than 250 employees. 

The IRS's website offers more information for both individual taxpayers and businesses/organizations on how to apply for these refunds.