When the price you pay isn't the price you pay in Massachusetts

Seems like there’s been a surprise waiting for a few cellphone purchasers these days in Massachusetts. In the infinite wisdom and most-likely unconstitutional action of the Department of Revenue, when you purchase your next cell phone, you won’t pay tax on the price offered. No, you will pay on the “full wholesale price.” We all know that the purchase of a cellphone is a bundled purchase. The retailers give you a discount on the phone but it comes with an obligatory contract, on which your monthly service charge is heavily taxed by the state.


Seems like the Department of Revenue in a “Directive” dated April 29, 2011, forced the seller of a cellphone which included a bundled package of services, to tax the phone itself at “full wholesale value.” Of course, they did not define the wholesale value. The Department of Revenue basically argues that the price of an object or service sold is not the final sales price, even though the bundled service is taxable. Nothing like turning over a few centuries of the nature of sales and negotiations.

When I go to Macy’s and a sweater has been marked down 50%, with the original and reduced rate shown on the price tag, I have never been taxed on the higher price. Nor have I been forced to sign a contract to wear the sweater, paying Macy’s on a monthly basis. When I go to purchase a new car and the sales price invariably comes in below the original asking price, I have never been taxed on the original sales price. And, no, I don’t have to pay General Motors a monthly fee to drive the car. The world has been and is ruled by fair market price determined by the actual sales price at the point of transaction. Any further laws that specific transaction may set in motion, such as sales taxes or levies, should apply to the actual sales price.

The DOR directive is clearly in conflict with Mass. General Laws, Chapter 64H, “Tax on Retail Sales of Certain Tangible Personal Property”. In Section 1, paragraph 19, the “sales price” is defined by “the total amount paid by a purchaser to a vendor as consideration for a retail sale, valued in money or otherwise” with the clear stipulation in subparagraph c that “(c) there shall be excluded (i) cash discounts allowed and taken on sales.” These are the same cash discounts the state is now taxing.

To selectively apply an archaic and unenforced “full-retail tax policy” to cellphones alone is both random and dismisses the concept of tying taxes to sales prices. Inexplicably, the Globe endorsed this although, in reading the editorial, I really have no idea what they’re writing about. I guess in Massachusetts, the price is wrong.