CLIENT ADVISORY: Update on Eligibility for Federal Income Tax (“FET”) Refund


Good news! All clients who provided long distance and bundledtelecommunications between March 2003 through January 2006 are still eligible for the Federal Excise Tax (“FET”) refund. Specifically, clients who purchased telecommunications services, either at wholesale, as a VoIP provider, for prepaid card services, or for integrated communications services, during this time period can still seek a refund of the FET from the IRS

Our firm originally believed that the deadline for filing amended tax returns with the IRS sunsetted this year, 2009. However, upon subsequent investigation, we have determined that the deadline for amending 2006 returns is 2010, or three years after the full year for which the original 2006 return was filed. Therefore, clients have until March 15, 2010 to file an amended return with the IRS seeking a refund on FET payments.

As we advised clients previously, in 2006 the Internal Revenue Service (“IRS”) ruled that carriers are entitled to a refund on FET taxes paid to the government between 2003 and 2006. To qualify for the refund, carriers who paid FET between this time period were directed to take a tax credit on their 2006 tax returns. Because of the extended deadline, clients that did not take a credit on 2006 tax returns now have until next year, March 15, 2010, to file an amended 2006 tax return and receive a credit for FET payments.

Clients who are unsure of whether FET payments were made for telecommunications services between March 2006 and January 2006 should examine customer invoices from this time period. If your customers were charged for a “FET” or ”Federal Excise Tax” on a invoice line item, you likely qualify for a reimbursement from the federal government. Furthermore, the IRS also presumes that a FET percentage tax (3%) is automatically included in charges for certain services. Thus, all clients who provided either long-distance or bundledtelecommunications services during 2003 through 2006 should contact our firm. Since local telephone service is still subject to the FET, refund claims with respect to local telephone service are not allowed.


Because of the time-limit on the ability to claim refunds for FET, and because filing an amended return with the IRS may take some time, clients who purchased metered, long distance services during the relevant timeframe (March 2003 through July 2006) should promptly investigate whether they may remain eligible for a refund from the IRS.

In particular, our firm urges clients who provided VoIP services during the applicable refund time period to check invoice records to confirm FET refund eligibility. We believe that because of the regulatory uncertainty surround federal regulation of VoIP services, many VoIP service provider clients may have overlooked this refund opportunity when first announced.

Clients who have already vetted this issue with our firm or previously filed for FET refunds in the past, may disregard this Advisory.

If you have questions about the FET refund opportunity or concerns regarding other communications taxes (including sales, use, excise and other state & local transaction taxes), please contact Chuck Helein at or by telephone: 703-714-1301.

ATTORNEY ADVERTISING DISCLAIMER: This information may be considered advertising in some jurisdictions under the applicable law and ethical rules. The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers

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