What are You Buying?-A Story

[Happy Camper]

So, a friend of mine goes to "buy", or "lease" or "get" the HR10-250 DirecTV DVR/TiVo for $499 from the local big box. But, they tell him, there will be $41.17 sales tax.

So, he is a tax lawyer, and he reads the D* contract "service agreement" telling him that at all times the DVR remains the property of Direct TV, but does not really specify that the "charge" he is paying is for renting, or leasing it, that charge comes later payable monthly. The potentially taxable "service" he is buying is the programming and transmission, so there is really no taxed sale of a service. So, he asks them, why are they charging tax-there is no sale or purchase, and, essentially, he says, he is being asked to pay for "AIR", or, put another way, or NOTHING AT ALL! If it's a "deposit" it certainly is not subject to sales tax.

Beautiful. Needless to say, the store manager was flummoxed. My buddy did not "get" his PVR, either.

One of the few times you can really love a lawyer. So, if we pay $499 or $100 or some other amount to "get" a piece of D* equipment under the new program, what are we paying for? What is the "cost" called? What are you "buying?"

 

[dragon002]

happy,

here we pay sales tax on hotel/motel rooms, we pay it at rental yards, on rental cars and on seats at sporting events. none of those are yours either. you are paying sales tax on the transaction , not the product.

 

[charper1]

Sales tax is required to be collected by law UNLESS it is expressively listed as an exempt item. That last part whould be the $100 question, is that reception hardware listed as an exempt item?

 

[damaged]

I don't think the post was just about the tax, it was about when someone pays "$499 or $100 or some other amount" to lease hardware, then pay a lease fee, what was the $499 or $100 bucks for?

In summary he is asking "What is the cost called, is it to buy it? (No, because they are not selling, they are leasing), is it the lease fee? (no because you pay a monthly lease fee).

And he is also saying, if they call it a 'deposit' then he is saying that that _is_ exempt (I don't know if that is or not, but, that is what I think HE is saying.)

 

[dragon002]

the $499 is for the right to use it.

 

[damaged]

the $499 is for the right to use it.

Then what is the lease fee for?

 

[dragon002]

the right to keep using it

 

[damaged]

the right to keep using it

aka. double dipping, thanks for the clarification.

 

[dragon002]

damaged, that is the only logical reason for it

 

[charper1]

I don't think the post was just about the tax, it was about when someone pays "$499 or $100 or some other amount" to lease hardware, then pay a lease fee, what was the $499 or $100 bucks for?

Ultimately I think the post is about both topics, but surely I read more about the taxation of a leased item, but I may have mis-read:

The buddy is a tax lawyer and says
"so there is really no taxed sale"
"why are they charging tax, there is no sale or purchase"
"he is being asked to pay for AIR, or, put another way, or NOTHING AT ALL"
"If it's a deposit it certainly is not subject to sales tax"

 

[Happy Camper]

The post was mostly about a good story, and a little humor about a bad deal.

Deposits on leased goods are exempt. If it's a "taxable capitalized purchase cost," then it is subject to tax, but the subsequent monthly lease payments would then be exempt.

So, what's in a name is potentially worth $41. We are not idiots, we do know that the deal is you pay to use it, and then you pay some more.

This guy spends his work life characterizing transactions in a manner so as to avoid legally being required to pay tax.

The rest of the time, he's just a normal TV watching guy like us who can smell the stink of Rupert Murdock a long way away.

 

[ADent]

Purusing the Colorado laws it looks like

You only owe tax on the difference between the original and residual value.

But "all payments required to be paid by the lessee pursuant to the lease contact are sales taxable" - so if you have a 2 year committment would your montly programming fee be sales taxable? This explicitly includes taxes and warranties and such. I would assume the $5/month lease fee is subject to sales tax.

 

[dragon002]

in PA. your entire bill is 0.06 taxable. (0.07 in allegheny and philadelphia counties)

 

[Digital Dude]

At Circuit City they have financing available for your lease deposit. rotglmao!

 

[vurbano]

At Circuit City they have financing available for your lease deposit. rotglmao!

I guess if your gonna let D* F you in the A$$ then CC should get a piece of the action too.

 

[stevesmall]

At Circuit City they have financing available for your lease deposit. rotglmao!

so 24 % interest plus if you dont get approve for the lower monthly payment i am assuming you will need a higher deposit on directv equipment, it could cost thousands for having the privelege of not owning directv equipment LOL
Directv might have the change the name to elitist tv, not for the poor or downtrodden, I dont think DIRECTV has a heart although i am told i have 5