# Why do we have to pay sales tax on the full retail value of a cell phone in California? **URL:** \ **Category:** Factual Questions\ **Created:** [July 21, 2011, 5:17am UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817 "2011-07-21T05:17:10Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![stevemcl](https://avatars.discourse-cdn.com/v4/letter/s/9e8a1a/32.png) [@stevemcl](https://boards.straightdope.com/u/stevemcl)\ **Post date:** [July 21, 2011, 5:17am UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/1 "2011-07-21T05:17:10Z")
Why do we have to pay tax on the full retail value of a cell phone!!! when it gets discounted and rebated to $0.?? How did the board of equalization pass such a law?? and is it only in California? I just bought a cell phone for $49.99 (with 2 year plan) and had to pay sales tax of $22.27 !! Can we get it repealed? thanks!, Steve McLaughlin ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [July 21, 2011, 5:26am UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/2 "2011-07-21T05:26:17Z")
Because your state government says so! According to this [Verizon thread from 2005](http://www.phonescoop.com/carriers/forum.php?fm=m&ff=2&fi=394162), cell phones are defined as a luxury by California authorities ans subject to taxation on the full manufacturer’s suggest retail price. [This LA Times article from 2010 seems to have the detailed scoop](http://articles.latimes.com/2010/oct/25/business/la-fi-lazarus-20101026). When you consider the government revenue problem in your state, every little bit helps. It’s highly unlikely you will get any traction on repealing it. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [July 21, 2011, 5:32am UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/3 "2011-07-21T05:32:06Z")
> [@stevemcl](#): > > Why do we have to pay tax on the full retail value of a cell phone!!! when > it gets discounted and rebated to $0.?? > How did the board of equalization pass such a law?? and is it only in > California? > I just bought a cell phone for $49.99 (with 2 year plan) and had to pay sales tax of $22.27 !! > > Can we get it repealed? > thanks!, > Steve McLaughlin It’s based on the BOE’s interpretation of the California sales tax law which they publish in [Regulation 1585](http://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1585.html). When the purchase price you are offered for the phone requires you to also purchase wireless service, the regulation calls this a “bundled transaction.” It is assumed that real price of the phone is hidden in an inflated service price, much like a eBay seller might sell a laptop for $0.01 plus $499.99 postage and handling. Other states make their own rules. If you want to do something about it, petition the legislature or challenge the BoE’s interpretation of the law in court. ---
**Author:** ![gatorslap](https://avatars.discourse-cdn.com/v4/letter/g/bb73d2/32.png) [@gatorslap](https://boards.straightdope.com/u/gatorslap)\ **Post date:** [July 21, 2011, 7:32am UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/4 "2011-07-21T07:32:15Z")
That’s true of any rebated item, not just cell phones. ---
**Author:** ![postcards](https://avatars.discourse-cdn.com/v4/letter/p/8e8cbc/32.png) [@postcards](https://boards.straightdope.com/u/postcards)\ **Post date:** [July 21, 2011, 2:14pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/5 "2011-07-21T14:14:13Z")
> [@gatorslap](#): > > That’s true of any rebated item, not just cell phones. In New York it’s true of any item on sale. Sales tax is always collected on the original purchase price, regardless of any discount. (Read the fine print on coupons.) ---
**Author:** ![Leaffan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/leaffan/32/299_2.png) [@Leaffan](https://boards.straightdope.com/u/Leaffan)\ **Post date:** [July 21, 2011, 2:20pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/6 "2011-07-21T14:20:47Z")
In Canada we have to pay sales tax on the value of the free toy in Happy Meals. So there. ---
**Author:** ![OldGuy](https://avatars.discourse-cdn.com/v4/letter/o/3bc359/32.png) [@OldGuy](https://boards.straightdope.com/u/OldGuy)\ **Post date:** [July 21, 2011, 3:01pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/7 "2011-07-21T15:01:41Z")
> [@Leaffan](#): > > In Canada we have to pay sales tax on the value of the free toy in Happy Meals. > > So there. Is the meal itself not taxed or taxed at a different rate? ---
**Author:** ![OldGuy](https://avatars.discourse-cdn.com/v4/letter/o/3bc359/32.png) [@OldGuy](https://boards.straightdope.com/u/OldGuy)\ **Post date:** [July 21, 2011, 3:02pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/8 "2011-07-21T15:02:56Z")
> [@postcards](#): > > In New York it’s true of any item on sale. Sales tax is always collected on the original purchase price, regardless of any discount. (Read the fine print on coupons.) I believe this it true for rebates and coupons. It is not true when a store simply marks an item down – 25% off – is it? ---
**Author:** ![Leaffan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/leaffan/32/299_2.png) [@Leaffan](https://boards.straightdope.com/u/Leaffan)\ **Post date:** [July 21, 2011, 3:21pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/9 "2011-07-21T15:21:13Z")
> [@OldGuy](#): > > Is the meal itself not taxed or taxed at a different rate? Fuck, who knows? A long time ago we got a federal Goods and Services tax (GST). Also, each province has its own tax rate, or lack thereof in some cases. At some point it became apparent that the free toy in Happy Meals was not being taxed according to the regulations. Yes, there’s tax on the meal, and tax on the toy but at different rates. Mind you some provinces have now combined the provincial tax and the federal tax into one all-encompassing Harmonized Sales tax (HST) which applies to just about everything but raw food and air. ---
**Author:** ![Machine\_Elf](https://avatars.discourse-cdn.com/v4/letter/m/82dd89/32.png) [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)\ **Post date:** [July 21, 2011, 3:25pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/10 "2011-07-21T15:25:56Z")
> [@gatorslap](#): > > That’s true of any rebated item, not just cell phones. Yep. If you think the tax on a cell phone rebate is painful, just wait until you buy a car that has a “cash back” promotion that bounces a couple thousand bucks back to you, incurring a couple hundred dollars’ worth of sales tax. ---
**Author:** ![hogarth](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hogarth/32/1773_2.png) [@hogarth](https://boards.straightdope.com/u/hogarth)\ **Post date:** [July 21, 2011, 3:26pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/11 "2011-07-21T15:26:06Z")
> [@OldGuy](#): > > Is the meal itself not taxed or taxed at a different rate? There’s federal sales tax on restaurant meals. There may or may not be provincial sales tax on restaurant meals. > [@Leaffan](#): > > Mind you some provinces have now combined the provincial tax and the federal tax into one all-encompassing Harmonized Sales tax (HST) which applies to just about everything but raw food and air. If you’re talking about Ontario, remember that GST only (not HST) applies to restaurant meals under $4, which may include a Happy Meal (I haven’t priced them recently). ---
**Author:** ![Machine\_Elf](https://avatars.discourse-cdn.com/v4/letter/m/82dd89/32.png) [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)\ **Post date:** [July 21, 2011, 3:28pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/12 "2011-07-21T15:28:45Z")
> [@OldGuy](#): > > I believe this it true for rebates and coupons. It is not true when a store simply marks an item down – 25% off – is it? Coupons are supposed to be processed _before_ the sale takes place, in which case sales tax is calculated as a percentage of the discounted total. My dad used to nitpick when our family went out to a restaurant with a coupon. If the server came back with the coupon figured in to the bill _after_ the sales tax, he made them go through and redo it with the coupon figured in before the sale tax. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [July 21, 2011, 3:39pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/13 "2011-07-21T15:39:05Z")
> [@](#): > > I just bought a cell phone for $49.99 (with 2 year plan) and had to pay sales tax of $22.27 !! No, you bought a cell phone for two hundred and something dollars, and paid for it in part by agreeing to a 2-year plan. A private business can choose to accept payment in whatever form it likes, and your cell phone company has decided to accept payment in the form of a phone contract. The government, however, insists that _its_ payments be made in the form of money at the time of purchase. Quoth **Machine Elf** : > [@](#): > > Coupons are supposed to be processed before the sale takes place, in which case sales tax is calculated as a percentage of the discounted total. In what state? That wasn’t the case in Ohio when I was growing up. ---
**Author:** ![Machine\_Elf](https://avatars.discourse-cdn.com/v4/letter/m/82dd89/32.png) [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)\ **Post date:** [July 21, 2011, 3:54pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/14 "2011-07-21T15:54:30Z")
> [@Chronos](#): > > Quoth **Machine Elf** :In what state? That wasn’t the case in Ohio when I was growing up. Minnesota. Apparently [there is a distinction between manufacturer and retailer coupons;](http://taxes.state.mn.us/sales/Documents/publications_fact_sheets_by_name_content_BAT_1100088.pdf) this matters if you’re buying products at a grocery store, but when we were dining at restaurants, it was of course the restaurant itself that was issuing the coupon, so sales tax always was supposed to be calculated last. Interestingly, Minnesota does _not_ tax the rebates on new cars - but they do tax rebates on pretty much everything else. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [July 21, 2011, 6:09pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/15 "2011-07-21T18:09:35Z")
> [@Machine\_Elf](#): > > Minnesota. Apparently [there is a distinction between manufacturer and retailer coupons;](http://taxes.state.mn.us/sales/Documents/publications_fact_sheets_by_name_content_BAT_1100088.pdf). That distinction applies to many (maybe all) states. The linked document gives a good description of why the two types of coupon are treated differently. Note also that this means that if a supermarket is doubling (or tripling) manufacturer coupons, then the doubled part is treated as a store coupon and taxed differently from the original manufacturer coupon. ---
**Author:** ![Tim\_T-Bonham.net](https://avatars.discourse-cdn.com/v4/letter/t/46a35a/32.png) [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)\ **Post date:** [July 21, 2011, 9:13pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/16 "2011-07-21T21:13:54Z")
People (and companies) try these kind of scams all the time, and governments make rules to catch them and make them pay their fair share of taxes. For example, in my state, people commonly sell their old used car to a relative, and report a sale price like $100. But the state looks up the blue book value of the vehicle, and bills you for the tax based on that. If it had been damaged in an accident or something, you have to prove to the state that the listed sale price was realistic to get out of paying the tax on their estimated value of the vehicle. ---
**Author:** ![Morgenstern](https://avatars.discourse-cdn.com/v4/letter/m/f9ae1b/32.png) [@Morgenstern](https://boards.straightdope.com/u/Morgenstern)\ **Post date:** [July 21, 2011, 9:49pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/17 "2011-07-21T21:49:38Z")
In California, we sales tax on the federal tax included in the price of a gallon of gas. ---
**Author:** ![IAmNotSpartacus](https://avatars.discourse-cdn.com/v4/letter/i/cc9497/32.png) [@IAmNotSpartacus](https://boards.straightdope.com/u/IAmNotSpartacus)\ **Post date:** [July 24, 2011, 6:01pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/18 "2011-07-24T18:01:13Z")
> [@t-bonham@scc.net](#): > > People (and companies) try these kind of scams all the time, and governments make rules to catch them and make them pay their fair share of taxes. > > For example, in my state, people commonly sell their old used car to a relative, and report a sale price like $100. But the state looks up the blue book value of the vehicle, and bills you for the tax based on that. If it had been damaged in an accident or something, you have to prove to the state that the listed sale price was realistic to get out of paying the tax on their estimated value of the vehicle. Not in [California](http://dmv.ca.gov/vr/vr_info.htm), use tax is exempted for family transfers, in fact I believe the exemption applies for gifts from non family members as well ---
**Author:** ![guizot](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/guizot/32/3636_2.png) [@guizot](https://boards.straightdope.com/u/guizot)\ **Post date:** [July 24, 2011, 6:39pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/19 "2011-07-24T18:39:12Z")
> [@Chronos](#): > > No, you bought a cell phone for two hundred and something dollars, and paid for it in part by agreeing to a 2-year plan. > [@t-bonham@scc.net](#): > > People (and companies) try these kind of scams all the time, and governments make rules to catch them and make them pay their fair share of taxes. Yes, if the phone company could pretend that they were not selling a phone by simply putting the charge elsewhere, think of all the other ways people could evade taxes: “Free car of $10,000 value, when you sign the five-year, $500/month maintenance plan.” ---
**Author:** ![RealityChuck](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/realitychuck/32/195_2.png) [@RealityChuck](https://boards.straightdope.com/u/RealityChuck)\ **Post date:** [July 24, 2011, 8:56pm UTC](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817/20 "2011-07-24T20:56:28Z")
> [@postcards](#): > > In New York it’s true of any item on sale. Sales tax is always collected on the original purchase price, regardless of any discount. (Read the fine print on coupons.) No. If an item is on sale, it’s paid on the price you pay for the item. If there’s a rebate or a coupon, however, it’s paid on the full purchase price. [Next page](https://boards.straightdope.com/t/why-do-we-have-to-pay-sales-tax-on-the-full-retail-value-of-a-cell-phone-in-california/589817.md?page=2)