IRS eyes Net phone taxes

Looks like Uncle Sam has his eye on taxing VoIP calls (voice over Internet Protocol). The IRS and Treasury Department are considering reinterpreting the federal excise tax in order "to reflect the changes in technology". If it fact they do decide to reinterpret it VoIP users will no longer get a free ride.

A "temporary" tax created to pay for the Spanish-American War may result in higher fees for Internet telephone calls.

The IRS and the Treasury Department have suggested that an existing federal excise tax on phone calls should be interpreted to apply to voice over Internet Protocol (VoIP) calls, a move that promises to roil the fast-growing industry and follows similar attempts by state officials to tax or regulate the technology.

In a notice published Friday, the IRS and Treasury Department said they are considering whether the 3 percent federal excise tax should be reinterpreted "to reflect changes in technology" used in "telephonic or telephonic quality communications."

"They're looking at VoIP and any other potential technologies that are flying under the radar," said Glenn Richards, a partner at the law firm Shaw Pittman in Washington who represents VoIP companies. "Clearly they're trying to extend their jurisdiction to apply the excise tax to as many 'calls' as they can. It's got to be a revenue issue for them. If everyone starts migrating to new platforms, they're facing a decrease in excise taxes."

News source: C|Net News.com

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