California says the iPhone costs $599

I recently purchased a new iPhone 3GS since my previous phone bit the dust (or pavement, more accurately). I went to order online via AT&T, and was surprised to find out the tax on a $199 phone was $56, or over 25%. Wha? I went to make the same purchase at Apple’s online store, and found the same thing.

Then I decided to just mosey down to the nearby (physical) Apple store – and of course the tax was the same.

California considers the price of the iPhone to be $599, and taxes it as such. It considers the $199 price not to be real, since it’s subsidized by AT&T. The Apple Store clerk mentioned that there are only like 3 states that tax this way. Ah, Cali.

It’s utter bollocks of course. The $199 is a discount, like anything else that’s on sale. And more importantly, the city and state tax my wireless plan at over 10% every month, anyway.

An effective 25% tax on the iPhone is a great way to ensure that iPhones are only purchased by people of means. So egalitarian!

Update: The SF Gate has a story on the law from a few years ago. Hat-tip to a commenter at Hacker News.

6 thoughts on “California says the iPhone costs $599

  1. Welcome to the people’s republic of California! I’ve always wondered how we pay so much in taxes and yet are so totally bankrupt.

  2. Woah that sucks. I work at an apple store in Honolulu and an iPhone 3GS 16GB is about $208 out the door.

  3. Ummm, the monthly contract fee of $90+ is what ensures the iPhone is only purchased by people of means. The upfront cost is nothing.

  4. Do they do this in California for all phones that are subsidized by carriers- including ‘free’ phones?

    I’m guessing they’d have to do it across the board. If that’s the case its not intended to keep the poor out, but rather just something on everyone.

    BTW- the iPhone is a serious luxury item. It just is. Expensive phone, expensive plans. If you’re caring about how much it costs you probably shouldn’t be buying it.

  5. Most of the things you claim happens to be astonishingly appropriate and that makes me ponder the reason why I had not looked at this with this light previously. This particular article really did turn the light on for me as far as this specific subject goes. But at this time there is just one point I am not too cozy with and whilst I try to reconcile that with the central theme of your position, let me observe just what all the rest of the subscribers have to say.Very well done.

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