Carrier Scammed on AT&T Sales Tax?

[capitanbuzo]

Also, the whole car lease versus "leasing" a phone isn't the correct argument.

 

[DoofenshmirtzEI]

You don't know what it said originally. You already posted that you didn't see any posts that were deleted and weren't aware that post was edited until I showed you, so your opinion about what it said or didn't say before the edits is irrelevant.

I was following this discussion from the beginning although I didn't say anything until later. Certainly if someone had claimed that you pay sales tax on cars based on MSRP, I would have gone, "Woah, wait, really?", and I would have remembered it even if I didn't comment. The edit is a minor correction of terminology given that phones are almost never leased.

Obviously the context of the discussion frames the responses within purchasing devices on cellular plans. If you are purchasing devices at MSRP from your cellular provider then that's on you. If you are purchasing phones from Apple Store or any other retailer then it's outside the context of this thread.

The OP was talking about Next plans, on which phones are bought at full retail and financed from a carrier (AT&T specifically). Other carriers have their own similar plans, although I'm not familiar with them other than they are generally also "buy full price and finance" plans. Since they don't have a subsidy to cover, they come with a discount or other lowered price compared to buying on a subsidized contract.

 

[BR3W]

You still technically keep it to term and are trading the residual value in for the right to buy a new one. You still owe tax on the whole thing. It is really just this straight forward. I don't understand what the fuss is about.

According to his original post, he's turning the phone in after 12 months of payments and is *not* keeping it to term. The estimated sales tax was based on the value of the device paid over 20 month and he's entitled to a refund of the taxes he paid that were estimated for those remaining 8 months.

Yes, but its not a returned item like a DVD player you bring it back 2 weeks later and get full price and all taxes back credited to your card.
Cause if I bring back the phone 18 months later the phone is now worth 50% or a lot less of what I bought it depending how much I abused it. So its not really I return it for a full refund 2 years later and I get the tax refunded to me.

You're looking at it backwards. Besides, no one is arguing that he should be refunded the full amount of the taxes he paid. He only owned the phone for 12 months and the taxes he paid were based on an estimated value after 20 months of ownership. He's entitled to 40% of his taxes back.

This isn't theoretical or my opinion about the matter. I provided the relevant Regulations and Sections as they pertain to California tax code so you can look it up and anyone else can dig up their own state's tax codes.

 

[BR3W]

I was following this discussion from the beginning although I didn't say anything until later.

If you knew the post was edited after the fact, and you posted that you didn't see any posts that were changed, and you questioned why I was talking about leasing, then that means you were lying or deliberately trying to mislead the conversation.

The fact that Next plans and other similar lease/finance plans charge taxes up front based on the MSRP of a phone yet no one realistically ends up paying that full retail amount because they either return or exchange their phones before the term is up, is precisely the point of the LATimes article explaining why this practice shouldn't be allowed since other Sections of California's tax code specifically limit both sales and use taxes to be levied against "value" of property and not "price."

 

[Applejuiced]

According to his original post, he's turning the phone in after 12 months of payments and is *not* keeping it to term. The estimated sales tax was based on the value of the device paid over 20 month and he's entitled to a refund of the taxes he paid that were estimated for those remaining 8 months.


You're looking at it backwards. Besides, no one is arguing that he should be refunded the full amount of the taxes he paid. He only owned the phone for 12 months and the taxes he paid were based on an estimated value after 20 months of ownership. He's entitled to 40% of his taxes back.

This isn't theoretical or my opinion about the matter. I provided the relevant Regulations and Sections as they pertain to California tax code so you can look it up and anyone else can dig up their own state's tax codes.

I think you're looking at it backwards.
Here's how you should look at it. He's selling it used after a year or 2 years to AT&T.
He pays for the full tax on his brand new device that he had for 12-18 or 24 months and there is no refund at all either full or any partial refund for any taxes.
Way too confusing and back and forth over a cellphone for the state to issue sales tax refunds dont you think?
Its something we all just eat it and suck it up. Its tax tax tax till we die

 

[capitanbuzo]

According to his original post, he's turning the phone in after 12 months of payments and is *not* keeping it to term. The estimated sales tax was based on the value of the device paid over 20 month and he's entitled to a refund of the taxes he paid that were estimated for those remaining 8 months.


You're looking at it backwards. Besides, no one is arguing that he should be refunded the full amount of the taxes he paid. He only owned the phone for 12 months and the taxes he paid were based on an estimated value after 20 months of ownership. He's entitled to 40% of his taxes back.

This isn't theoretical or my opinion about the matter. I provided the relevant Regulations and Sections as they pertain to California tax code so you can look it up and anyone else can dig up their own state's tax codes.

You do know you are incorrectly applying the tax code, right?

 

[BR3W]

I think you're looking at it backwards.
Here's how you should look at it. He's selling it used after a year or 2 years to AT&T.
He pays for the full tax on his brand new device that he had for 12-18 or 24 months and there is no refund at all either full or any partial refund for taxes.

Your opinion notwithstanding, that's not how the law defines the terms.

 

[BR3W]

You do know you are incorrectly applying the tax code, right?

As far as I can see, based on people's responses and their stated backgrounds, I'm the only person so far who has specific legal training in this area so I suspect that I'm not applying the tax code incorrectly.

 

[Applejuiced]

Your opinion notwithstanding, that's not how the law defines the terms.

Hey if you think the government will start issuing tax refunds on cellphones then go for it. Since the law defines it then ask your state for 40% of your taxes back on your cellphone and see how far you get.
The law is there to generate revenue and money for governments. And one thing they hate is to make it hard on themselves to collect or go back and forth. You know taxes never end

 

[capitanbuzo]

As far as I can see, based on people's responses and their stated backgrounds, I'm the only person so far who has specific legal training in this area so I suspect that I'm not applying the tax code incorrectly.

I work in the industry so I know how it is applied.

I didn't read the whole arguments but this is how I will respond. As to the phone being financed through Next, tax is owed on the full purchase. It's not a lease. You are not required to turn the phone in. If you do, it's in consideration for the new device and the cancellation of the term. As such, you are not entitled for a refund on the tax paid.

As to the whole MSRP debate, if leased, tax is applied to the agreed purchase price of the car (which derives into the lease payments). Different situation.

 

[BR3W]

If we have to go back to the car analogy, it's like bringing a trade in worth $20K that still has a $20K balance on its financing contract. The dealer may accept it in trade, and pay off your balance, but it isn't going to lower the $40K negotiated price on the new car you want, so no sales tax abatement.

Even though the dealership wont credit you for the taxes you paid on the original amount of 40K, you will be entitled to petition your state's tax board for a refund on the remaining 20K.

You can petition the state for a refund if you move out of state, too.

It works both ways, however, you're supposed to pay the state when you move into it (and voluntarily pay taxes on things purchased out of state, which many don't do and why states started passing regulations taxing internet sales).

 

[Applejuiced]

I work in the industry so I know how it is applied.

I didn't read the whole arguments but this is how I will respond. As to the phone being financed through Next, tax is owed on the full purchase. It's not a lease. You are not required to turn the phone in. If you do, it's in consideration for the new device and the cancellation of the term. As such, you are not entitled for a refund on the tax paid.

As to the whole MSRP debate, if leased, tax is applied to the agreed purchase price of the car (which derives into the lease payments). Different situation.

Very well said, that's a logical post and explanation right there.
Not like I'm an accountant or tax professional but what BL4zD suggest is not going to happen.
Would be nice though but not realistic.

 

[BR3W]

Hey if you think the government will start issuing tax refunds on cellphones then go for it. Since the law defines it then ask your state for 40% of your taxes back on your cellphone and see how far you get.
The law is there to generate revenue and money for governments. And one thing they hate is to make it hard on themselves to collect or go back and forth. You know taxes never end

It's not a matter of what I think or don't think, it's a matter of how the tax code operates.

I work in the industry so I know how it is applied.

I didn't read the whole arguments but this is how I will respond. As to the phone being financed through Next, tax is owed on the full purchase. It's not a lease. You are not required to turn the phone in. If you do, it's in consideration for the new device and the cancellation of the term. As such, you are not entitled for a refund on the tax paid.

As to the whole MSRP debate, if leased, tax is applied to the agreed purchase price of the car (which derives into the lease payments). Different situation.

What is your specific function?

Do you have a doctorate in law, like myself? Are you a CPA? I doubt either of those are true or you would have been more specific.

The code is clear: you pay taxes based on the value of property that you use. I cited the relevant Sections so anyone can go and educate themselves. The rest of what you wrote, along with others, is mere opinion.

The only thing strange about cellular devices is that "value" is calculated from MSRP rather than price and that's by specific regulation. Consumers are still entitled to refunds based on the property they no longer own or don't use in the state.

That's why, with the Next plan, the tax levied is an "estimated tax." AT&T doesn't refund the taxes paid on an unused portion of the device, but consumers can and should petition their tax board for their entitled refund.

If they are unwilling to do so, based on cynical opinion like those held by Applejuiced, that's a personal decision but it isn't the fault of the law.

 

[Applejuiced]

It's not a matter of what I think or don't think, it's a matter of how the tax code operates.


What is your specific function?

Do you have a doctorate in law, like myself? Are you a CPA? I doubt either of those are true or you would have been more specific.

The code is clear: you pay taxes based on the value of property that you use. I cited the relevant Sections so anyone can go and educate themselves. The rest of what you wrote, along with others, is mere opinion.

The only thing strange about cellular devices is that "value" is calculated from MSRP rather than price and that's by specific regulation. Consumers are still entitled to refunds based on the property they no longer own or don't use in the state.

That's why, with the Next plan, the tax levied is an "estimated tax." AT&T doesn't refund the taxes paid on an unused portion of the device, but consumers can and should petition their tax board for their entitled refund.

If they are unwilling to do so, based on cynical opinion like those held by Applejuiced, that's a personal decision but it isn't the fault of the law.

Hey bro, you go first.
Petition the state for a partial tax refund on your cellphone, go thru all the paperwork, when you get denied get a lawyer, file a court case appeal and let us know how far you got with that in order to get your $18-19 back Which will never happen. They will just deny you till you turn blue and give up and after you spend 100's of times the amount you could have got back in the first place.
LMAO

 

[capitanbuzo]

It's not a matter of what I think or don't think, it's a matter of how the tax code operates.


What is your specific function?

Do you have a doctorate in law, like myself? Are you a CPA? I doubt either of those are true or you would have been more specific.

The code is clear: you pay taxes based on the value of property that you use. I cited the relevant Sections so anyone can go and educate themselves. The rest of what you wrote, along with others, is mere opinion.

The only thing strange about cellular devices is that "value" is calculated from MSRP rather than price and that's by specific regulation. Consumers are still entitled to refunds based on the property they no longer own or don't use in the state.

That's why, with the Next plan, the tax levied is an "estimated tax." AT&T doesn't refund the taxes paid on an unused portion of the device, but consumers can and should petition their tax board for their entitled refund.

If they are unwilling to do so, based on cynical opinion like those held by Applejuiced, that's a personal decision but it isn't the fault of the law.

I actually am one of those things so maybe take a step back. You are correct. You are paying tax on what is used. When you turn in the phone and get a new one, you essentially use the whole phone. Could you turn in the phone for a refund? Nope. There's no straight cancellation option.

 

[DoofenshmirtzEI]

According to his original post, he's turning the phone in after 12 months of payments and is *not* keeping it to term. The estimated sales tax was based on the value of the device paid over 20 month and he's entitled to a refund of the taxes he paid that were estimated for those remaining 8 months.

The whole "estimated" thing is a red herring. I get "estimated sales tax" at purchase sometimes, simply because states sometimes have rather arcane laws about exactly where the sale occurs for the purpose of figuring out which taxing jurisdiction to use, and that's especially true of over the phone or online sales and someone may have to eyeball it before finalizing what the sales tax will be. There's an area near where I live where a zip code covers two taxing jurisdictions, so if it is determined tax is based on the customer's residence, then someone may have to pull out a map and actually check which side of the line the customer is on. It has nothing to do with estimating value on a financing contract.

You're looking at it backwards. Besides, no one is arguing that he should be refunded the full amount of the taxes he paid. He only owned the phone for 12 months and the taxes he paid were based on an estimated value after 20 months of ownership. He's entitled to 40% of his taxes back.

This isn't theoretical or my opinion about the matter. I provided the relevant Regulations and Sections as they pertain to California tax code so you can look it up and anyone else can dig up their own state's tax codes.

Who is he entitled to his 40% of his taxes back from? What if the person he buys the phone from, the person who finances it, and the person who offers the trade in are all separate people?

 

[DoofenshmirtzEI]

It's not a matter of what I think or don't think, it's a matter of how the tax code operates.

If true, it has to be some kind of bizaaro California thing.

 

[cousintim]

Just like your Texas example, which is one of the few states that charge taxes based on the full *purchase* price (not "retail", as you continue to claim and keep posting that I'm incorrect about) at the end of a lease buyout.

It is your claims that are incorrect. You confuse sticker price with retail price. The first is the suggested price set by the manufacturer; the second is the price negotiated and paid by the buyer at retail. Texas sales tax is calculated on the latter, as I correctly stated.

I'm the only person so far who has specific legal training in this area so I suspect that I'm not applying the tax code incorrectly.

Please don't conflate legal training with an accurate understanding and application of the tax code. Courts regularly remind us that one sometimes has very little to do with the other.

 

[capitanbuzo]

I think your issue here is assuming that this is a lease when it clearly is not. You do not have the option to turn your phone in after a year and be clear of any obligation. You have the option to terminate the contract with a new replacement contract. By terminating the contract, you are being relieved of an obligation. This is a taxable event. Since tax was collected on the full price of the phone, that means that tax was really paid in full and there is zero basis for the relief of liabilities.

 

[BR3W]

I actually am one of those things so maybe take a step back. You are correct. You are paying tax on what is used. When you turn in the phone and get a new one, you essentially use the whole phone. Could you turn in the phone for a refund? Nope. There's no straight cancellation option.

I did take a step back and saw in the beginning of the thread where you made a reference to your qualifications, so my apologies in that regard.

Who is he entitled to his 40% of his taxes back from? What if the person he buys the phone from, the person who finances it, and the person who offers the trade in are all separate people?

The state's tax board.

I think your issue here is assuming that this is a lease when it clearly is not. You do not have the option to turn your phone in after a year and be clear of any obligation. You have the option to terminate the contract with a new replacement contract. By terminating the contract, you are being relieved of an obligation. This is a taxable event. Since tax was collected on the full price of the phone, that means that tax was really paid in full and there is zero basis for the relief of liabilities.

Yes, as I already pointed out, the post I responded to originally stated that it doesn't matter if it's a lease or not and then edited it to refer to financing. The discussion has been centered around my post #11 and later attempts to clarify tax liability in regards to leasing and then post #33 where I pointed out that cellular device sales have a unique liability under California code that I think is inappropriate.

It's difficult to filter the trolls from people engaging in a good faith discussion. The OP's question was already answered as far as I can tell.

 

[DoofenshmirtzEI]

The state's tax board.

So, wow, in California, if I don't finance something (buy it outright), and then sell it later, I get no right to sales tax back, but if I finance it, and sell it before the end of the finance contract, the state has to give me part of my sales tax back?

California sure is weird.

 

[capitanbuzo]

I did take a step back and saw in the beginning of the thread where you made a reference to your qualifications, so my apologies in that regard.

I'd like to understand how you conclude that someone changing their financing terms halfway through the contract is considered to be "using the whole phone" according to California law (or your state's relevant law).

The state's tax board.

See my post above. You aren't changing financing terms. It's a cancellation of a contract with a renewal of a new contract. The whole idea of using only a portion of the phone is incorrect. That was never part of the original agreement. I am not going to dive into IRC guidance for this matter and am merely trying to explain my rational to the masses.

 

[BR3W]

See my post above. You aren't changing financing terms. It's a cancellation of a contract with a renewal of a new contract. The whole idea of using only a portion of the phone is incorrect. That was never part of the original agreement. I am not going to dive into IRC guidance for this matter and am merely trying to explain my rational to the masses.

I saw your post after mine and edited my response after seeing your rationale.

On Tmobile we have EIP, Jump, and Jump on Demand so customers have the choice between financing and leasing. Post #3 misled me by implying AT&T's Next plan was a leasing option. I think you'll agree that the change between "lease" and "finance" is a substantive change and not simply a minor typo like one of these responses claimed.

 

[capitanbuzo]

So, wow, in California, if I don't finance something (buy it outright), and then sell it later, I get no right to sales tax back, but if I finance it, and sell it before the end of the finance contract, the state has to give me part of my sales tax back?

California sure is weird.

That's not true. I thin the biggest issue here is what people's idea of what is actually occurring. A lease is giving consideration to use an item for a set duration. We can get into the whole capital vs operating lease but it's unneeded. When you finance it, per the contract, you assume ownership with some sort of collateral. Since there is a full transfer of ownership, sales tax is owed.

If you were actually leasing the phone for one year and were required to give it back, then I would agree that a portion of the sales tax, if paid in full, would be required to be refunded but that is not the case here.

 

[capitanbuzo]

I saw your post after mine and edited my response after seeing your rationale.

On Tmobile we have EIP, Jump, and Jump on Demand so customers have the choice between financing and leasing. Post #3 misled me by implying AT&T's Next plan was a leasing option. I think you'll agree that the change between "lease" and "finance" is a substantive change and not simply a minor typo like one of these responses claimed.

I concur that "lease" vs "finance" is a key issue here and has different implications. As stated in my last post, I agree with your refund rational of the lease refund.