I 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 $200 subsidy that AT&T paid to Apple.
Just an FYI. AT&T does that for all their phones not just iPhone 3G. Any promotion that they offer, the consumer is responsible to pay the tax on the original price. And, because you were in a city that charges city as well as state tax, you were required to pay that amount.
It’s legal. THAT DOESN MEAN IT’S RIGHT TO CHARGE ME 25% SALES TAX. Down with usurious taxation!
It is ridiculous that CA state is mandating sales taxes on the supposed “Full Price” of the phone. If you go to buy apple 8GB iphone thats up for sale for 99$ with 2 yr contract mandated data plan, the taxes are a whopping 43.6 $ for California residents. Thats close to 40% taxation for a 99$ phone and is insane.
It is legal but it is immoral for the state to pass such bills in CA or any other state. I don’t think the price offered to us is subsidized – AT&T offers this price in lieu of a customer committing to 2 yr service contract with voice and data. So, if the state is looking at this business transaction as one qualifying for full price taxation, then they’re wrong and immoral.
I read the information in Apple website and it appears that these ridiculous state taxes are applicable only to iphones getting shipped to CA, RI, MA states. So, friends – if you’re driving outside of your state- you’re better off buying the phone outside of these states.
Instead of stimulating the economy, CA is killing consumers with ridiculous taxation rates. Down with insane taxation ! down with big government !
I agree with Poonam. I am buying mine from Vegas and helping state of Nevada not California. Why should I pay extra $40.00…no California is going loose $23 that I was going to pay and now Nevada will gain it.
serves them right.
Amit
don’t bother buying the iPhone in Nevada. I was also over-charged by the AT&T store. The purchase price was $99 but I paid tax on $499. I believe I should have been charged $7.75, but I paid a whopping $44.49. I complained to AT&T, APPLE, and I am in the process of trying to connect with the State of Nevada Taxation. I was thinking of contacting the local TV station that handles consumer complaints.
I don’t quite see what the complaint is. You’re getting the phone at a price discounted hundreds of dollars. This seems like people wanting to have their cake and eat it too. The phone costs $499, AT&T is just agreeing to pitch in to help you pay for it, but the tax is still on you, since you’re buying the thing.
You should only have to pay tax on what the price is not what it use to be.
Suppose you went to buy a phone for $299, and some random stranger that happened to be in the store offered to pay $200 of the price for you. Should the state then decide that you only have to pay tax on $99 instead of paying tax on $299? Should the state force the generous stranger to pay the sales tax on the $200 he’s paying?
Of course, AT&T isn’t a generous stranger. They’re paying part of the cost of the phone because you’re signing a contract with them. But even though you’re paying $99, the fact remains that the phone is being sold for $299 and so the state expects to collect sales tax on $299.
I’m not saying I like it, but it does make sense and it’s not a matter of AT&T or Apple trying to screw the customer.
I was just about to call them. $299.00 and $61.16 in CA sales tax. Not only is it immoral but it is criminal in my opinion. If anyone is interested in taxes in general… I encourage you to google “freedom to fascism” It’s a documentary by Aaron Russo the producer of Trading Places with Eddie Murphy and Dan Akroyd. It’s a history of how the income tax came about in this country. I think you would all be surprised to find out that we didn’t always pay taxes on our labor. You can watch for free.
I had no intention of saying that but it seemed fitting since this particular iphone tax is hilarious and sad. Think of $40 times how many iphones they sold. More revenue for the state to waste and less money in your pocket, as usual…
regards,
campaignforliberty.com
Paul,
I agree that the general state of affairs with taxes in the US and CA is terrible, but the sales tax on the iPhone isn’t actually any worse than on anything else. It’s just confusing that they don’t make it clear that the purchaser is paying the sales tax on the total price of the iPhone including the AT&T subsidy.
In general, I am of the opinion that a sales tax is far better than an income tax. For example, the FairTax proposal.
Eric
In the Apple store in Palo Alto I was charged $64.66 sales tax for the 32GB iPhone ($299). I also found it surprising, then what else is a subsidized price then a discount? Or is this in the future going to be the way stores go to just say “the unsubsidized price is 500 instead of 50 on those pants, that’s for what you have to pay sales tax”
For me it looks like a hidden way to make money and claim the overcharge of being a sales tax.
The subsidy is different than when you buy a can of soup at the grocery store for 20% off. When you buy the can of soup, the grocer has decided to accept a lower margin on the soup, but isn’t paying anyone else.
In the case of this subsidy, AT&T actually does pay the subsidy amount to Apple (regardless of whether you buy the phone from an Apple store or an AT&T store).
AT&T unquestionably has control of the market with the iPhone and that’s what SHOULD be looked at…not Apple. Do you suppose Apple really worries whether Google offers Google Voice on its platform…. as long as individuals are purchasing their phones – and they’re purchasing these life-changing gimmicks! I love mine! The dropped phone calls are one too numerous (AT&T), but the phone is brilliant! One thing I wish it would have got is Flash to play videos from certain internet sites!