Tax on "unbundled" price of iPhone?

[Catzilla]

Apple charges tax on the unbundled price of the phone in RI & CA. W.T.F.?

[C(-)ris]

Blame the state lawmakers and the people who voted for them.

[space-time]

yes, I think I heard that before. the difference between unlocked and contract phone is $450, over two years that comes to $18.75/month. Some states claim that you should pay all tax up front. Then I wonder if each month you pay sales tax again on the entire bill (including the $18.75 which goes to the phone) or only on the remaining portion of the monthly bill.

[GGD]

For California at least, it's been like that for many years, even before the iPhone. In the state's sales tax view, there's no such thing as a "free phone".

That was one reason why I used to buy refurbished AT&T prepaid Go Phones to use as replacements for our Post-Paid plan, the sales tax on them was the based on the actual sale price, so paying for the refurb + tax was cheaper than a "free phone" + high sales tax, and also didn't lock you into a two year contract.

[davester]

It's always been true of products where the "razor" is free or cheap and the "blades" cost a lot. This is because some companies used to try to avoid sales tax this way. It's no different than buying a $700 piece of electronic equipment and financing it over two years.

[space-time]

davester wrote:
... It's no different than buying a $700 piece of electronic equipment and financing it over two years.

Indeed, but I would like to know if they force you to pay tax again on the entire phone bill each month, or if the $18.75part which is phone subsidy is tax free since you already paid tax up front. can someone from those states clarify this issue? Thanks

[davester]

I don't think there's sales tax on phone service. You can be absolutely sure that the bean counters at the phone companies are not paying a penny more in the other taxes than is required. This particular issue is a no brainier.

[space-time]

davester wrote:
I don't think there's sales tax on phone service.

really? I pay sales tax on pre-paid refill cards.

[testcase]

NY definitely adds tax to phone service. All of the various taxes, fees, surcharges etc add up to almost what the service fee is for the phone itself.

[numbered]

There is a difference between sales tax and excise tax. (Of course if feels the same when you write the check.) Sales taxes are charged on the entire value of the purchase of new phones, and it has been this way for decades. It is just that the phones are so much more expensive that the tax line item becomes obvious.

Excise (or use) taxes are charged on some products (gas, booze,) in addition to sales taxes. However, most jurisdictions do not charge sales taxes on services. Instead they charge excise taxes on things like telecommunications or airline tickets.

Thus, monthly bills have several types of excise tax (federal, state, local, plus things like the "universal access" fees.) We are not paying more sales tax, we are paying a use tax every month.