How are taxes calculated when buying an iPhone with Trade In

Every place I have ever lived in the USA, the taxes will be based on the full retail price of the new item you are acquiring. Your credit for the trade in may be applied towards your final bill, but the state (and or city and or county) will want their full tax due on the retail price of the new item.

Some states don’t work that way, but according to online sources, most, including CA do so. When the discount or rebate is coming from the manufacturer themselves, most states do not exempt that portion from taxation since the new product is still being sold at full price. The rebate may be applied to that, but since it is in the form of general store credit, it’s not considered a taxable price reduction.

Alonso Gonzalez wrote:

I'm planning on buying an iPhone X in San Jose, if I trade in my iPhone 7 Plus I would get 315 dollars in credit. Taxes would be applied with the $999 price tag? or to the lower price of $684?

It's in the form of an Apple retail gift card in the amount of the trade-in value. So it would be processed as an exchange of the used iPhone for $315. Then the iPhone X would be sold at the $999 retail price plus California/local sales tax. The $315 from the gift card would be credited towards the final amount.

You do mean San Jose, California? In that case there are small differences in local sales tax. San Jose is 9.25%. If you meant the Apple Valley Fair store, that's kind of odd since the mall is in both San Jose and Santa Clara. I believe the Apple Store there is technically in Santa Clara where the sales tax is 9.00%. The Apple Stores at the Apple HQ and the new Apple Park visitor center are in Cupertino and that's 9.00%. If you're going to be in San Francisco (3 Apple Stores), there it's only 8.50%.

https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx

Michael Black wrote:

Every place I have ever lived in the USA, the taxes will be based on the full retail price of the new item you are acquiring. Your credit for the trade in may be applied towards your final bill, but the state (and or city and or county) will want their full tax due on the retail price of the new item.

I was pretty sure that was the case.

Taxes should be calculated on the price you are going to pay, which is the lower price. You should not be paying tax on the full price. However, it would depend on how they calculate the trade-in, whether it is a gift card, which would be applied after the purchase is made, like a credit card, and then you would owe the balance.

I've not done this before, so I cannot be absolutely sure which method they use. They can answer this at the Apple Store.

y_p_w wrote:

It's in the form of an Apple retail gift card in the amount of the trade-in value.

When I traded in my iPhone 5S for an iPhone 7 I was given a credit for its trade-in value against the purchase of the iPhone 7, and I paid tax on the net amount I paid. So you can't generalize.

I have experience with this, and it occurs in other places, also. For example, if you trade in a car do you pay tax on the full price of the car, or the price after the value of the trade-in is applied? This varies depending on the state. The only way to find out, as others have said, is to ask the store where you plan to buy it. Or buy it in a state with no sales tax. Here's the list:https://www.thebalance.com/states-without-a-sales-tax-3193305

You need the actual store, because there are over 4,000 tax jurisdictions in the US, and the sales tax is different in each one.

My guess would be the lower price, but to be sure, why don't you call the Apple Store to check?

Alonso Gonzalez wrote:

I'm planning on buying an iPhone X in San Jose, if I trade in my iPhone 7 Plus I would get 315 dollars in credit. Taxes would be applied with the $999 price tag? or to the lower price of $684?

It depends on the state. I agree with Chris. Ask at the Apple Store.

Lawrence Finch wrote:

You need the actual store, because there are over 4,000 tax jurisdictions in the US, and the sales tax is different in each one.

California's Franchise Tax Board has a list of local sales taxes by city/county.

Alonso Gonzalez wrote:

I don't think that would be possible, I'm flying to the US in June

So, you either make a long distance call from where you are now or you wait until you get to the U.S and call then. Or, you bring enough money for the worst case scenario. What the sales tax will be will also depend on which city and state you purchase the phone in.

Please keep in mind that, if you buy a phone in the U.S., the warranty is only valid in the U.S.. If you have a problem with the phone once your in your home country, you will need to bring the phone back to the U.S. for servicing.

I don't think that would be possible, I'm flying to the US in June

This also identifies another problem. Purchasing a phone in a country you do not intend to use it in is not a good idea. The warranty for the phone is only valid in the country of purchase, and if you have a warranty issue, you would have to fly back to the US with the phone to get it serviced. That would negate any cost savings you may have realized by making the purchase in the US. It is best to purchase an iPhone in the country you intend to use it in.

I have never had any issues with an iPhone

You may have just jinxed yourself. As soon as you say that you haven't had trouble, trouble occurs. Also, the iPhone X is full of new technology, any of which can go wrong. Face ID can fail, as I have read of others experiencing this issue. Just saying, things can happen, since it is an electronic device. Never say never!

Alonso Gonzalez wrote:

I will be buying it in either San Francisco or San Jose California, I think I will ask once I'm there. I already knew about the warranty, I have never had any issues with an iPhone

Missed this. San Francisco has the lowest sales tax between the two (8.50% vs 9.25%). However, if you were thinking of the Valley Fair Apple Store, that's technically in Santa Clara. I believe the lowest tax rate for any Apple Store in the Bay Area is at the one in Walnut Creek (8.25%) but that might be out of the way for you.

I'm sure it does, but that's irrelevant. There are also companies that know the tax code of every jurisdiction and the rules for every jurisdiction. And sell their service to merchants to electronically calculate the tax. And the rules are complex; for example, do you pay tax at the rate for the location where you purchase something, or the rate for your home address? For example, If you live in New York and buy a big ticket item in New Jersey, which has a lower tax rate, you end up paying the New York tax - if you get caught. But New York tax authorities hang out in parking lots of stores in New Jersey like Ikea, and follow up with large purchases from cars with New York tags.

It won't matter for an iPhone, of course. This is just hypothetical.