Suboptimal Retail Experience — Apple iPhone 3G Sales Tax Overcharge
Published by Eric August 10th, 2008 in Customer satisfaction, Gadgets, Hardware, Taxes, The Suboptimal WayI went to the Apple store at Valley Fair mall in Santa Clara CA yesterday afternoon to get an iPhone 3G. My mother paid for half of it as my graduation present.
Only after I got home did I discover that Apple overcharged me $16.50. The receipt shows the price of the phone as $299.00 and the sales tax rate as 8.25%, but the amount of sales tax charged was actually $41.17, for a total charge to my credit card of $340.17. The correct amount of sales tax at 8.25% is obviously $24.67, and should have resulted in a total charge of $323.67.
In the store, I didn’t really see what they were charging me. They had me sign for the credit card transaction using a stylus on a handheld point-of-sale terminal, and it might have shown the amount on the LCD, but it was very hard to read, so I (foolishly) assumed that they were competent and honest.
I wonder how many people have fallen victim to this without noticing. Are they actually remitting the full amount of tax they’ve charged to the state of California, or are they pocketing the difference?
Update: As Dan pointed out in a comment, this actually is legal in California. If a cell phone is sold at a discount, it has to be taxed at full price: State Board of Equalization Publication 120. I think Apple should have indicated on the receipt that the tax was based on a phone price of $499.
Same here, except they actually told me in the store that the sales tax would be calculated on the retail amount of $499 for the iphone instead of $299. They wouldn’t give me a reason why though. I didn’t question it at the time, but then later when I thought about it, I wondered about the legality of such a charge. This can’t be legal. I’m going to research it more to find out.
I was wrong–it is legal, in California: http://www.boe.ca.gov/pdf/pub120.pdf
Dan, thanks for researching this. Apparently we paid the sales tax on the $200 subsidy that AT&T paid to Apple.
Just an FYI. AT&T does that for all their phones not just iPhone 3G. Any promotion that they offer, the consumer is responsible to pay the tax on the original price. And, because you were in a city that charges city as well as state tax, you were required to pay that amount.