What's Bugging You?

What's Bugging You? Mobile phone tax

Wednesday, July 21, 2010

Almost every cellular phone company offers big discounts as incentives to get you to sign up. But those prices aren't telling you the whole story. Did you realize when you buy a mobile phone, you're actually paying tax on the undiscounted price? It's bugging a lot of Eyewitness News viewers.

Buy that fancy new cell phone, and get ready for a surprise you didn't expect.

"It's a hidden tax," said Anne Yost.

Yost said when she bought a new cell phone, the price was $199, but the sales tax didn't look right.

"I looked at the bill and said, 'How come the tax is so high?'" said Yost. "It just totally made no sense. Because 600 is an arbitrary number anyway. Who pays 600?"

The list price is $600. When you get a service plan, the price drops to $199, but you still have to pay sales tax on the full $600. It's state law.

"When you buy a cell phone, you quite often get a break in the price of the cell phone, but because you get that break is only due to the fact that you've bought a service plan, and because of that, the retailers are required to pay us, the Board of Equalization, the total value of the phone," said Anita Gore, spokesperson for the California Board of Equalization.

So we priced an iPhone, just to give you an idea how much this would be. The price of the iPhone is $199. The tax on that would be $58.40. That comes out to about 29 percent tax. It's the same with any phone where the price is lower with a contract.

People Eyewitness News spoke with said what bugs them is that they aren't told about this till the very end.

Debbie Hoffman was buying a new phone.

"As long as they tell you up front, I think it's fair," said Hoffman. "But if you get to the register and all of the sudden there's this big amount of money that you weren't expecting, then you have to kind of go back through it again and decide if you want to pay for the phone or not."

It's not that easy to find the information. On the Apple website, you have to scroll all the way to the bottom, and there, in small print it tells you California and two other states do this.

Some people said they're going to buy their phones in another state.

"Whether you buy a sweater, a pair of shoes, a cell phone, a CD, it's all taxable," said Gore. "If you purchase it through the Internet, through the mail, out of state, for use in California, you owe the use tax as the consumer."

So yes, taxes, as usual, are unavoidable. But at least you can be aware of them and not be surprised when you go shopping for that next expensive cell phone.

(Copyright ©2014 KABC-TV/DT. All Rights Reserved.)

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