The 3% federal telephone excise tax on communications services was established in 1898 to assist with financing the Spanish-American War and continued for the same purpose for World War I. Before the widespread use of the telephone following World War II, the tax was considered a “luxury” tax. Although the tax was scheduled for elimination over several decades, American consumers continue to pay the 3% federal tax on all local and long-distance service today. It is the third largest federal excise tax behind those on tobacco and alcohol.