I understand why the miles are taxable, and that is without dispute. The line about requiring the customer to pay for it is a complete and total crock.

I worked for a large insurance company several years ago, and a mistake by the company resulted in incorrect withholding from a few customers' accounts. These were very BIG customers who did a LOT of business with us, and coming back to charge them some tax would (1) annoy the customers and (2) not exactly look good for the company.

The company made a decision that rather than risk alienating the customers and losing their business, they'd just eat the tax expense. They paid the IRS and the customers were never the wiser. The IRS didn't care, they got their money.

Bottom line, the IRS just wants the tax on these miles. They don't care who pays it, so long as they get their money.

MCI is just "spinning" (after all, no one LIES anymore).