Do You Pay Tax on Price Before or After Instant Rebate?
 

There was a deal on a Moto Razr with a $250 Instant Rebate. My feeling was that I would have had to pay tax on the $250, others have said no.

What is correct?

Thanks

You do have to pay tax on the rebate amount. I just got a new phone today, and the tax was about equal to the amount I was supposed to pay on the phone after rebate.

Do you mean you paid tax on the full amount, or only paid tax on the price after the instant rebate was deducted?

I paid tax on the full amount. The price after the rebate was deducted was similar to the amount of tax I had to pay, which seems odd, but is always the case when I buy a cell phone.

So, rounding out the numbers, I paid 50 bucks for the phone and tax came out to 50 bucks as well (total was 100), because they taxed me on the entire amount, pre-rebate.

You pay tax on whatever the price is that you are paying for the product, regardless of a rebate. For instance, if something is $300, and has a $50 instant rebate that is taken off at the register, the product rings up to $250 and that is the amount you pay taxes on.

The state of Texas charges sales tax on the amount actually paid by the purchaser. For a buy one, get one deal on a meal two $10 meals should have the sales tax charged on $10, not $20. Some places will try to charge sales tax on the full amount and pocket the difference.

I've read that other states have different rules on sales tax.

California charges tax based on pre-rebate amount.

Not True. I bought the razr at CompUSA on Monday while the deal was on (in Pleasanton, Ca) and paid $54.XX.

So to clarify:
Tax on Instant Rebate = NO
Tax on Mail-in Rebate = YES

That doesn't sound right. $50 in tax? Not sure what LA's tax rate is, but that phone would have had to have been $500 with a 10% tax to come up with $50.

Most places I've seen don't give out their $500 models with $450 rebates either.

Maybe it's a local rule and not a state one but I'm pretty sure that I have paid sales tax on instant rebates in Los Angeles. I know I have paid tax on mail-in rebates, but that's a no-brainer. I'm pretty sure we paid tax on our cell phones on the full "value" of the phone, not the cost of the phones after the instant rebates.

I'm in CA and I too have had to pay tax on the pre-instant rebate price when purchasing a cell phone. The phone I bought was free after the instant rebate, but I still had to pay about $9 in tax. I complained about it and was told it was a CA law that only applied to purchases of cell phones. I was too lazy to look up to see of the law existed since it was only $9 and I may buy a cell phone once ever 3-5 years. I've always been charged tax on the price after an instant rebate for all other purchases in CA, however.


Ok, I edited the message since this post made me want to figure this out...

http://www.sfgate.com/cgi-bin/articl...UG5NCKUCQ1.DTL

According to that article, the CA law is encompassed in several sections of the CA revenue and taxation code, summarized in the board of equalizations regulation 1585 found here:

http://www.boe.ca.gov/pdf/reg1585.pdf

Overall, seems like a pretty lame rule to scam a few extra bucks from the people.

You bought a $600+ phone?

:lol: Glad to see my math is right. Read post #9.

Heh....tax in LA is 8.25%

x(0.0825) = 50

x = $606.06

well I was close, is what I meant, meaning it was doubtful the tax was $50, unless some sales guy gave away a $600 phone for $50.

It was actually two phones, less the instant rebate for the renewal of my two year deal, less the new-every-two promotion, and plus some miscellaneous accessories (which I foolishly did not add to my original paid amount above). The point was that they charged tax on the full price of the phone, and always have, even if the price is radically different after promotions, instant rebates, and mail-in rebates, so much so that tax alone rivals what I actually pay for the phone. I'm curious if this is the same everywhere, now.

In California it depends on who is offering the discount. If the instant rebate is a store rebate(considered the same as a sale price)- you should pay tax on the after rebate price.

$100.00 Price
- $50.00 instant rebate
= $50.00 + tax on $50

If the instant rebate is from the manufacturer you would pay tax on the prerebate price.

$100.00 Price
- $50.00 instant rebate
= $50.00 + tax on $100


Of course they might look the same to everyone but the corporate people who arranged the rebate ad. Both will say instant rebate.

Coupons are handled the same way. you should not pay taxes on amount of a store coupon.
$5 price
-$1 coupon
= $4 + tax on $4

You do pay the tax on a manufacturers coupon.

$5 price
-$1 coupon
= $4 + tax on $5

Okay. That makes more sense now. :)

Hmm... then the cell phone companies seem to be screwing us. I'm pretty sure the instant rebates on cell phones don't come from the manufacturer... don't the cell phone companies subsidize losses on the phones to get people to commit to multi-year deals?

That's just crazy talk! ;)

The deal I was looking at, the $250 Instant Rebate was from the carrier (T-Mobile), not from Motorola. But not from the store itself (CompUSA).

So, who knows. In my experience, I have paid tax on the pre-rebate amount on anything I can remember. Even grocery store type coupons, I believe I paid tax on the pre-coupon amount, for example soda.

well, i just got a lg vx-8100. it says retail price is 269.99, and unit price is 99.99 with a 50 MIR (no mention of a rebate anywhere). had to pay tax on the retail price.

IV. EXCLUSIONS BY DEFINITION — Various types of property and business activities are excluded from the
imposition of tax because of basic definitions contained in the Sales and Use Tax Law.
A. “Sales Price’’ and “Gross Receipts’’
• CASH DISCOUNTS — Discounts taken on sales are excluded from the measure of tax. Manufacturers’
coupons are rebates and do not reduce the measure of tax, but a retailer’s own coupons qualify for
exclusion as cash discounts.
REVENUE: N/A SECTIONS: 6011 and 6012

So when I bought some Dvd-R's from Officemax recently they offered an instant rebate. It was an officemax rebate not a manufacturers rebate so I paid tax on the lower amount. Had this been a manufacturers rebate I would pay tax on the whole amount.

http://www.boe.ca.gov/pdf/pub61.pdf

That does make sense. I bought a $10.99 DVD with a $10 Best Buy reward zone certificate and, to my surprise, only paid tax on $0.99. Thanks for clearing that up.