The federal government Thursday said it is ending what Treasury Secretary John Snow called an "ancient" tax on long distance phone service.

The Treasury Department said in a statement that it will no longer pursue a legal dispute about the federal excise tax on long distance service and taxpayers will receive a tax refund on the taxes they've paid in the last three years. The refund will be part of the 2006 tax forms that are due on April 15, 2007. The tax adds about three percent to phone bills.

"It's time to 'disconnect' this tax and put it on the permanent 'do not call' list,'" Snow said in a statement. He also urged Congress to put an end to the part of the tax law that taxes local service. The tax was established in 1898 and was considered a luxury tax on citizens who were wealthy enough to own telephones.

In its statement, the Treasury Department said, "the federal excise tax on telephone calls is not compatible with today's modern information-age society." Snow called it, "an outdated, antiquated tax that has survived a century beyond its original purpose."

A number of courts have found the tax to be illegal and, in its statement, the Treasury Department said it would end any court actions attempting to continue the tax.