The Department of the Treasury has recently indicated that it may abandon efforts to save the excise tax on interstate telecommunications services. It is one tax we all can live without.

For those who have paid this tax in recent years, the question is: How should the government compensate us?

The excise tax was instituted to defray the cost of the Spanish-American War. More than 100 years later, it is still being paid. Long-distance service was once a luxury, but is now taken for granted. Many of us now also have other means of calling long distance: wireless, voice-over Internet protocol, or buckets of minutes from local phone companies. Those of us who still have a separate long-distance phone company rarely look at our bills or the fine print describing the 3% federal excise tax.

The legal problem facing the federal government is that an IRS statute specifies that the tax only be applied to telephone services that charge a fee based on both distance and time. Many phone companies now offer buckets of minutes, so individual calls are often not billed. Since 1996, federal law prohibits charging more for calls to Alaska or Hawaii than to New Jersey. One would be hard-pressed to find a phone company today that actually charges a fee based on distance and time.

A few years ago, phone companies and others began challenging the IRS in court. Not surprisingly, the federal government has lost most court cases on this matter. No one in Congress appears eager to reformulate a 19th-century tax for 21st-century services. Secretary Snow earlier this year suggested that it may be time to abandon the tax.

Abandoning a tax is one matter; providing refunds is another. When the government concedes that the tax is unlawful, it potentially exposes itself to billion of dollars in tax refund claims. If the excise tax that raised several billions dollars in 2005 is unlawful, it likely has been unlawful for the past several years.

The end of litigation on the tax may only mark the beginning of litigation on refunds. The telecommunications companies that actually wrote checks to the IRS for the excise tax may seek a refund. The largest payers in recent years were AT&T-SBC and Verizon-MCI. Each of these companies paid many billions of dollars in excise taxes over the past decade, and they have the financial records to document how much they have (over)paid the IRS. Moreover, these companies were harmed by the tax inasmuch as it discouraged customers from using long-distance telecommunications services, eroding the profitability of company operations.

Of course, the excise tax was paid not by the companies but by their customers. Some, including the IRS, may argue that any refunds should go directly to customers. Tracking down the customers, however, is not a simple matter.

Many individuals who overpaid the excise tax have passed away. Few of us keep records of phone calls for more than a year, much less 10. Asking consumers to document and calculate their overpayment would be a cruel exercise in searching for documents that may yield only a few dollars, even if a refund application were successful. Telephone companies could be assigned the responsibility of distributing refunds to their users, but that could be an enormous administrative burden for companies whose relationship with customers constantly changes.

Large corporate users such as Exxon Mobil or IBM could quickly document their overpayments, which might run into the millions of dollars. If the federal government insisted on documentation from users, large users would file early. The federal government, however, might feel uncomfortable providing refunds at a greater incidence for large users than small ones.

The IRS will argue against refunds, primarily to conserve revenue. While it is hard to be sympathetic to an agency that has overtaxed for years, the IRS would find it difficult to administer a sensible refund scheme. The courts may yet be called on to resolve whether any refunds are warranted from the obsolete excise tax, and, if so, whether an imperfect refund scheme is better than none at all.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.