

California says the iPhone costs $599 - mwsherman
http://clipperhouse.com/blog/post/California-says-the-iPhone-costs-599.aspx

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jrockway
This sounds like double taxation. The "subsidy" is something you pay for every
month on your bill, which you also pay taxes on. So they get you for their
imaginary cost of the phone, then they get the actual cost (minus what you
paid upfront) as part of the taxes on your monthly bill.

I am all for paying my fair share of taxes, but when two groups in the same
organization can't communicate and it costs me money, that upsets me.

~~~
slpsys
They do communicate, it's only CA law that sales tax on phones are for the
unsubsidized price; it's not like either party is unaware of this.

You also don't ostensibly pay a 'subsidy', they're 'giving' you the $400 in
exchange for a 2 year service contract, not explicitly baking the subsidy into
the price (e.g. after your contract is up, you do not start paying less just
because you've 'paid off' the phone). That's also not the imaginary cost of
the phone; as someone who's lost an iPhone, there's nothing imaginary about
that $400 :)

~~~
e40
What about the taxes I'll pay for the 2 years of service? IIRC, there are
quite a lot of taxes built into my phone bill.

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martingordon
I've been wondering about this, and I guess this is a good a thread to ask as
any:

Why _does_ the iPhone cost $599? The iPod touch, with similar components,
costs $199. Are the phone chips that expensive, or are there licensing fees,
additional regulatory requirements, etc?

~~~
mseebach
Simple: Because Apple can get people to pay $599 for the iPhone.

More specifically, they can get people to sign up for $XX/month plans, which
means Apple can get AT&T to pay them $399 for the hardware. There's no such
deal to be made for the touch, thus it's $199.

As for the components, I'd be surprised if an iPhone off of the line in China
would cost much more than $50.

~~~
scw
The components in a 16GB 3GS are estimated to cost $178.96:
[http://blogs.barrons.com/techtraderdaily/2009/06/24/apple-
ip...](http://blogs.barrons.com/techtraderdaily/2009/06/24/apple-iphone-3gs-
materials-cost-similar-to-last-version/)

~~~
protomyth
Wasn't the old rule of thumb that you price manufactured goods at 3x the
production cost?

~~~
nitrogen
I've seen 5x used in pro audio from BOM to retail.

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eli
_Beware California's hidden cell phone tax_

[http://www.sfgate.com/cgi-
bin/article.cgi?file=/chronicle/ar...](http://www.sfgate.com/cgi-
bin/article.cgi?file=/chronicle/archive/2005/05/06/BUG5NCKUCQ1.DTL&type=business)

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tibbon
I'm guessing they do this in California on ALL phones that are subsidized
right? This isn't just an iPhone thing. Any Nokia or Motorola should have the
same thing happening to it. Unless it is an 'Apple tax' in which case that's
just wrong.

While the State spends plenty of money, they also need to take it in. Last I
checked the State was nearly bankrupt and needed to do whatever it could to
raise money. Seems they are doing it.

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antirez
Well, in Italy the iphone _costs 600 €_ (but you can put any kind of SIM
inside, so it's not carrier blocked).

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

Oh come off it; taxing baby formula at a higher rate than other goods might
suck for people who aren't of means, but taxing luxury goods like iphones?

~~~
patio11
Sales taxes on anything -- luxury or not -- are regressive taxes on the poor,
because the poor spend a higher portion of their income on consumption than
the non-poor do.

For example, let's say we have a uniform sales tax of 5%. A poor person with
an income of $20k will spend almost all of that $20k during the year, paying
5% of her salary in taxes. (She might even borrow money and spend more than
her income, meaning relative to her income the rate increases to more than
5%.)

Say for the sake of argument unpoor me makes $40k and I spend $30k, saving the
remaining $10k. I pay $1.5k in taxes, more in absolute terms but less as a
percentage of income (3.75%), which is the definition of a regressive tax.

There are other ways sales taxes tend to favor the unpoor. For example, a poor
person will typically buy almost all goods locally and thus be subject to tax
on all of them. This is not necessarily true of non-poor people -- more than
half of my monthly purchases are tax-exempt because of where I make the
purchase. (For example, when I buy software from American companies, neither
Japan nor my locality nor most US states tax me.)

There are tweaks you can make to sales taxes which make them marginally
"fairer" to the poor: exempting food and clothing, for example, which the poor
tend to spend more on as a percentage of income than the rich. However, these
tweaks get very complicated very fast (a lot of governments actually have a
policy which sounds like "Exempting food sales but taxing prepared food sold
for immediate consumption unless it is take-out except taxing hot take-out." I
wish I was joking. My sympathies in advance to anyone who writes POS software
for French bistros.) These exemptions also tend to cost the state a lot of
money, because non-poor people spend lots of money on food, clothing, etc.

Anyhow, long story short: sales taxes are, and must always be, a regressive
tax on the poor.

~~~
nixme
_a lot of governments actually have a policy which sounds like "Exempting food
sales but taxing prepared food sold for immediate consumption unless it is
take-out except taxing hot take-out."_

This sort of thing is absolutely true here in SF. For example, buying a
sandwich at Subway doesn't usually incur a sales tax. But answer "yes" to
"Would you like it toasted?" and suddenly your $5 footlong is now ~$5.50
courtesy the State of California. See [http://thomashawk.com/2008/06/cheap-
bastard-says-dont-order-...](http://thomashawk.com/2008/06/cheap-bastard-says-
dont-order-your-bread-toasted-at-subway-and-always-order-your-coffee-to-
go.html)

~~~
patio11
Thank you for correcting my mistaken impression that there was a silver lining
to any Californian tax policy.

<http://www.boe.ca.gov/pdf/reg1603.pdf>

 _“Hot prepared food products” means those products, items, or components
which have been prepared for sale in a heated condition and which are sold at
any temperature which is higher than the air temperature of the room or place
where they are sold. The mere heating of a food product constitutes
preparation of a hot prepared food product, e.g., grilling a sandwich, dipping
a sandwich bun in hot gravy, using infra-red lights, steam tables, etc. If the
sale is intended to be of a hot food product, such sale is of a hot food
product regardless of cooling which incidentally occurs. For example, the sale
of a toasted sandwich intended to be in a heated condition when sold, such as
a fried ham sandwich on toast, is a sale of a hot prepared food product even
though it may have cooled due to delay. On the other hand, the sale of a
toasted sandwich which is not intended to be in a heated condition when sold,
such as a cold tuna sandwich on toast, is not a sale of a hot prepared food
product. When a single price has been established for a combination of hot and
cold food items, such as a meal or dinner which includes cold components or
side items, tax applies to the entire established price regardless of
itemization on the sales check. The inclusion of any hot food product in an
otherwise cold combination of food products sold for a single established
price, results in the tax applying to the entire established price, e.g., hot
coffee served with a meal consisting of cold food products, when the coffee is
included in the established price of the meal._

Good golly, I am so glad I don't have to program anything like that in my
shopping cart...

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timcederman
Massachusetts does the exact same thing.

~~~
holygoat
They don't call it Taxachusetts for nothing, hmm?

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kevinpet
If the providers advertised this fact more, they could pocket a little bit
more profit by selling the phone with a payment plan. This would reduce the
service part of the monthly bill and so reduce the utility taxes for those who
live in a city run by thieves.

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Tichy
Sounds as if the problem is different taxes for physical devices and for
mobile operator subscriptions (or whatever the categories are). If one is 25%
and the other is 10%, of course the iPhone will eventually cost nothing.

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chrischen
I thought the iPhone was already supposed to be purchased by people of means.

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bshep
Buy it out of state

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_ck_
So California is close to being the first failed state despite high taxes on
luxury items.

Let me guess, CA has low taxes on property, so they have to tax everything
else?

~~~
joshu
Bingo. Prop 13:
[http://en.wikipedia.org/wiki/California_Proposition_13_%2819...](http://en.wikipedia.org/wiki/California_Proposition_13_%281978%29)

~~~
gaius
The alternative to Prop 13 is that people who lived their whole lives in CA
can't afford the taxes to retire there.

~~~
joshu
This is an interesting line of thought, but you'd be better off if you
followed it to its conclusion.

Assuming the same level of property taxes, others must pay more, making the
state unattractive long-term. Does this mean overall tax revenue declines
eventually?

This statement is true for everywhere, not just CA. Why should it be different
here?

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superchink
That's just not right...

