Telephone Federal Excise Tax Law and Legal Definition

In 1898, Congress passed a 3% excise tax on telephone calls to raise the funding necessary to fight the Spanish-American War. At the time the tax was imposed, only 2,000 phone lines were operational in America. Today, over 90% of American households have telephone service.

This tax, now commonly referred to as the Spanish-American War tax, was made permanent in 1990, after 31 years of "phase outs" and was set at 3%. The tax was at its highest rates during and afterWorld War II. Between 1943 and 1954, the rate was a flat 25%.