Mass. Consumers Could Soon Pay More In Taxes On Cell Phones

By Joe Shortsleeve, WBZ-TV

BOSTON (CBS) — Who pays full price for a cell phone? They almost always come with a deep discount as long as you get the service plan too.

But there’s a change coming in the way your next cell phone could be taxed this summer. It means many of us will end up paying more, despite those enticing ads we’ve seen in the Sunday circulars which promise hundreds in savings.

Starting on July 1, the state is telling stores they can no longer collect sales tax based on those low, discounted prices. Shoppers in Brookline’s Coolidge Corner think this change is unfair. They told us shoppers should be taxed on what they actually pay. One woman compared it to buying a TV on sale, saying you pay tax on the lower price.

WBZ-TV obtained a directive issued by the Department of Revenue which outlines these changes for retailers.

WBZ-TV’s Joe Shortsleeve reports.

Commissioner Navjeet Bal said, “Whether you buy your cell phone directly from a wireless carrier or a retail store, which frankly is where most people buy their cell phones now, you will be charged a sales tax on the higher of the wholesale price, or the amount that you actually pay.”

So imagine one of those circulars with an advertisement for a phone retailing at $599, but on sale for just $99 with a service contract. Now you wouldn’t pay sales tax on $599, but you‘d wouldn’t pay sales tax on $99 either. You would have to find out a third price.

That third price, the wholesale price, would be used as the basis for the tax if you are buying the cell phone with a service plan. Bal said a consumer would have to find out that third price from the retailer.

Even though this sounds confusing, Bal makes the case this will simplify the process for consumers. She also said that the vendors will now have the option of absorbing the higher tax.

When asked if there was a real probability that retailers would absorb the tax and make this good news for cell phone shoppers, Bal replied, “It may, or it may not.”

Bal contends large retailers should have been collecting the tax on the higher retail price all along, and that using the wholesale price is actually good news for consumers.

We went to a number of popular stores which sell electronics with our undercover camera. At store after store, we were told that our sales tax would be calculated on the low discount price, not the retail price. That means that come July 1, we would actually be paying more.

One shopper said, “I don’t think that’s right. I don’t think they should be able to do that.”

Edgar Dworsky, of, also thinks this new directive is unfair.

“I think its double dipping in a sense, “said Dworsky. “They are saying you are buying a plan with this so we are going to charge you full tax on what the whole cost of the phone is, but the are also collecting tax on the service plan each month the plan is rendered.”

Commissioner Bal said the regulations haven’t been changed since the early 1990s, and that the wireless industry has changed dramatically. But for consumers, the changes could be more expensive, and harder to understand.

  • Mass. Consumers Could Soon Pay More In Taxes On Cell Phones | Cell Phone Deals, News and Reviews

    […] posted here: Mass. Consumers Could Soon Pay More In Taxes On Cell Phones This entry was posted in Verzion and tagged cell-phone, change-coming, circulars-which, […]

  • justsayin'

    Somebody please explain to us how this makes it easier? Does it surprise me? NO! The registry already does the same thing. buy a used car, private sale, for $1000 and the state values it at $4000, you pay the higher sales tax. When are more people going to get mad?!

    • taxmemore

      dont forget our excise tax. if you pay 400 and then sell your car, you have a rebate coming. does the state send or tell you about it? no, the thieves keep it unless you request/apply for it. most people forget. the state crooks are “facilitating” in a scheem to keep money thats not theirs!

      • Jim

        I have a Connecticut based number on my AT&T national plan so I’ll buy in Connecticut and pay Ct tax while I stay in Mass. How’s that for Mass Revenue.

    • Todd D Barton

      When will people get mad? When people stop just going along with what the “STATE” tells us we have to do. We elect the people that make the laws. We don’t vote them out, they think they are untouchable. The American Revolution started because of similar reasons.

  • D

    Can’t you buy your phone in NH?

    • whocares

      yes, and will donate my old phone and claim the deduction

  • Fed up

    It is just another excuse to carve more money out of our wallets. Fact is if you buy the cheaper phone it is not the same you are locked into a plan with a specific carrier. If you buy the phone out right you can use it with any carrier and do not need a long term plan. It is literally a different phone.

  • Joe

    Commissioner Bal,

    I have decided to use your logic when filling out my taxes next year, let me explain. I am a small business owner and I purchased two new work trucks this year. Normally, under section 179, I would be able to write off the entire “purchase” price in one year or choose too depreciate said cost over five years. I paid $44,000 for each truck. Now, the sticker price of each truck, including the custom dump body was $56,000. Normally, that would mean I have $88,000 in deductions.

    However, following your train of thought, I have decided to use the full $56,000 sticker price as the basis for my deduction. Therefore, that means I will be deducting $112,000 in capital purchases instead of the normal $88,000. Thank you for your clarification regarding this matter and saving me $24,000 in taxable income. I’m sure you agree this makes sense based on your own new accounting practices.

    • Todd D Barton


    • Paul

      I love it!!!!! I am sorry but that is absolutely rational thinking. I passed that by many of us here in accounting…and unless the state wrote in the exception to the loophole….I am willing to try it next year.

  • Fed up

    Personally I think this story falls under irresponsible journalism. The calcification of the phones in questions were never even mentioned. Perhaps a search for locked and unlocked phone should have been done by the reporter covering the case. Then a valid argument could have been presented to the commissioner to explain the gross generalization made when they passed this new tax law

    Let me Google that for you

  • DL

    When I bought my son the new iPhone at the Apple store in the mall in December, I was confused by the tax amount then, which was higher than expected. They explained to me that they were required by Mass law then to charge sales tax on the un-discounted retail price of the phone (without contract price) rather than the discounted price I was purchasing it at. It was a huge difference and I would have saved money if I let him buy it in NYC where he lives which has a higher sales tax rate.

  • Perks210

    Simply add cell phones to the growing list of items to purchase in NH. This list currently includes beer, liquor, cigarettes, tires, soon soda (thank you Mayor Menino) and now cell phones. No wonder Mass needs to keep looking for new taxes, everytime they find a new one, it drives consumers elsewhere.

  • leftypockets

    All the college students that come into the state need to know about this new tax so they don’t get ripped off. Whether it’s fair or not is beside the point.

    When the state is so disingenuous about taxes that is makes me angry. As the saying goes NAVJEET, don’t PI$$ on my foot and tell me it’s raining – how insulting you are!
    Way to drive business to NH. And by the way – what is going to happen to all those $7-20 prepaid phones that many people need – do you think TracPhone is going to pay for the increase in taxes. Way to go – make poor people pay more …..


    I will continue to purchase my phone in New Hampshire. No sales tax, no hassle.BestBiy has a nice selection as does the AT&T store in Portsmouth and Salem

  • Empty Pockets

    Since the ILLEGAL communist shakedown on automobile sales tax at he registry is so successful, the Beacon Hill syndicate thinks it can impliment it everywhere. Since when does NAVJEET get to legislate sales tax whenever and wherever she pleases? Taxation on fictitious values=TAXATION WITHOUT REPRESENTATION= UNCONSTITUTIONAL and ILLEGAL. Joe is absolutely correct! Take the deduction on the sticker price regardless of your purchase price. When the people of this state with intergrity finally move out, NAVJEET and the socialist party can pull the wagon themselves.

  • Don't buy your new phone in taxachu$$ett$ - Page 2

    […] […]

  • Curious About “Unfair” Sales Tax On Cell Phones « CBS Boston

    […] But the state has decided that cell phones are different.  Joe Shortsleeve did a story about this change a few months ago.  You can see that here. […]

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