California Court of Appeal Decides Sales Taxability of Bundled Purchases of Cell Phones, Cellular Services

The California Court of Appeal Feb. 27 decided the sales and use taxability of bundled purchases of cell phones and wireless cellular services. Taxpayers bought cell phones bundled with wireless service contracts from carrier-retailers like Verizon and AT&T. The tax was determined in accordance with Regulation 1585, which calculates the tax on the phone’s unbundled price. Taxpayers challenged the regulation, asserting that it unlawfully measures the tax on the phones’ unbundled sales price. The court of appeal noted: 1) the regulation didn’t tax more than the total bundle price paid by consumers; 2) the Department of Tax and Fee Administration ...