Cell phone surprise

Time to upgrade your cell phone? Think you've found a great deal on a discounted phone by renewing your plan for another two years? Well, be aware that in California, you will pay sales tax on the FULL RETAIL VALUE of the phone, not the discount price.

Even though the tax code states that sales tax is based on "the gross receipts of any retailer from the sale of all tangible personal property sold at retail -- in other words, the amount the retailer received for the product -- Regulation 1585 says that when you get a discounted price by signing up for a service plan, then sales tax is based on the non-discounted price.

For heavens's sake, nobody walks in to the Verizon store and pays full price for a phone without getting a plan, and everyone knows it. The phones are priced accordingly.  Some people have even reported paying more in taxes than they did for the phone.

The state, however, argues thusly: if you were to go in and purchase a data plan without buying a phone, they would not discount the monthly rate for the plan, which "proves" that the plan does not subsidize the cost of the phone. But you pay tax on the plan as well, so this is totally bullshit. According to SFGate, the state rakes in over $181 million annually on this little gambit.

See also:  http://www.sfgate.com/business/article/Beware-California-s-hidden-cell-phone-tax-2349249.php

How the heck can the state be going broke?