IRS, Treasury Want Cell Phone Tax Repealed

Shulman denied that the IRS had been trying to "crack down" on workers who don't pay the tax. Instead, he said, the IRS was "attempting to simplify the rules and eliminate uncertainty for businesses and individuals."

Some employers have faced big tax bills after failing to comply with the law.

In 2008, the IRS audited two University of California branches, in Los Angeles and San Diego. As part of a settlement, UCLA paid a tax assessment of $238,474 and UCSD paid $186,471.

Industry representatives said they were pleased that the IRS changed its position.

"We just think that this law was put into effect in a bygone era," said John Walls, vice president of public affairs for CTIA-The Wireless Association, a trade group.

"In 1989, cell phones were considered a luxury item that were actually referred to as car phones," Walls said. "Now, we have unlimited calling on our cell phones. We have free nights and weekends. The company is not even paying for that. Why should I get taxed for that?"