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!

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