Taxes on iPhone Trade in Program

[SkydiverTilt]

Something isn't sitting right with the taxes on the iPhone trade in program. When you get the phone you pay the tax on it. It's around 8.1% in Colorado. But you turn it in after a year, so you only really pay $44.91*12=$538.92

That's $43.65 in tax which is acceptable.

But when I purchased it last year they charged me over $80 in taxes, full price of the phone. And I'm assuming they are about to charge me another $80 in taxes when I trade it in.

That doesn't sit right with me. The tax should be monthly for as many months as you have it wrapped in the payment, be it 12 or 24 months.

Anyone on board here, or am I off base with leasing programs and how taxes are managed?

 

[kch50428]

It's up to your state... It's not Apple's call on what value is assigned to the taxable amount.

 

[comiken205]

Isn't it the same when you lease a car? The taxes are owed up front on the lease of the vehicle. I'm assuming that is the same concept with the iPhone.

 

[SwitchBeach]

Why are they charging you taxes on the phone you are trading in? That makes no sense.

But as noted, retail stores must follow the tax laws in the locality where they are located. Most states require that taxes be paid on the full price on the item sold. The fact that you are selling back to Apple (or anyone else) a year later is immaterial.

 

[flyinion]

Because you're essentially financing it over 24 months with the option to give it up and get a new device without paying the other half 12 months into the loan. If they only charge 1/2 the tax and then you keep paying it for two years instead of trading it in, now the State has missed out on 1/2 their tax that was supposed to be paid.

 

[Quis89]

The idea is that you're agreeing to pay the full balance of that phone over the course of 24 months. When you sign your agreement it is with that in mind. So they are allowing you to pay the full price over those 24 months and you're just responsible for the taxes up front. They give you the OPTION to trade that phone in after a year and they will forgive the remaining balance on it if you CHOOSE. They aren't requiring you to turn that phone in. They are giving you the option to do so.

When I was employed at Sprint they introduced the lease program. So we had two separate programs. The Lease and the Installment Billing. If you went with the Lease you didn't pay any taxes up front. Because under the lease you HAD to turn that phone in. You weren't purchasing it. That was understood. You didn't own that phone. So they couldn't charge you taxes. But with the Installment Billing, you were paying to own. Once that phone was paid off it was yours. So you had to pay the taxes.

If Apple is operating this as a lease...then you shouldn't have to pay taxes in my opinion because you pay taxes on something you'll have ownership of. If ownership isn't an option then you shouldn't be required to pay taxes, imo. But under many agreements, you are paying installments to OWN the phone and you have the OPTION to upgrade early if you choose. Keywords there are OPTION. You don't have to do that.