California Tax Insanity

My cousin just posted this on Facebook:

Just had to pay $42 in sales tax for a $99 replacement iPhone! Called apple because I thought it was a mistake, but nope, it’s just the state of California charging tax on the highest allowable price. The rep told me the state was worried about getting its cut. I’m SURE the extra money will be well spent!

She was charged the tax on the manufacturer’s suggested retail price (MSRP) of the iPhone not the amount she was actually charged.

Does this mean that California customers can be charged tax on the “$110 Value” of the Yoshi Blue pan, the absolutely free ceramic mandolin, and the venting glass lid (just pay separate S&H) instead of on the $19.95 (plus S&H) that the firm actually charges?

According to Find The Best the California sales tax rate varies from 7.25% to 9.75% depending on location.

At the lowest rate sales tax is $1.45 on the $19.95 price. It’s $7.98 on the $110 value price.

At the highest rate sales tax is $1.95 on the $19.95 price. It’s $10.73 on the $110 value price.

So the state can steal more from you by assessing sales tax on the “value” of the item rather than the price paid.

In the Yoshi Blue case it’s $6.53 at the lowest sales tax rate, $8.78 on the highest sales tax rate.

In my cousin’s case she should have paid 8.75% on the $99 price of her replacement iPhone: $8.66. Instead she paid $33.34 more based on the iPhone’s MSRP.

MSRP can be anything that the manufacturer wants. The suggested retail price is just that, a suggestion. Retailers will charge whatever they want to based on many different factors. There’s the wholesale price, markup, deciding if the item will be a loss leader or if the retailer just wants to reduce inventory and places the item on sale.

So, when is sales tax charged on “value” rather than “price”? When it’s California charging it.

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