Tax News

CCH (cch.taxgroup.com) reports:

  A California sales and use tax regulation regarding cell phones and other wireless telecommunication devices provided a safe harbor from unfair competition claims filed by a taxpayer against a provider. The provider advertised a cellular phone for sale at half the retail price if the purchaser also enrolled in a calling plan package. The California Code of Regulations requires that sales tax must be computed on the non-sale price of the product. The regulation permits, but does not require, that the charge be passed on to the customer. The provider did so without informing the customer prior to sale that the tax would be based on the full price of the cell phone. The amount of tax is shown on the sales invoice furnished to the customer at the time of sale. The taxpayer alleged that the provider engaged in unfair competition and misleading advertising by failing to inform the consumer that the tax would be imposed on the full price of the cell phone. The unfair competition law prohibits any unlawful, unfair, or fraudulent business act or practice, but its scope is limited. Specific legislation may limit the judiciary's power to declare conduct unfair. If the Legislature has permitted certain conduct, courts may not override that determination. When specific legislation provides a safe harbor, plaintiffs may not use the general unfair competition law to assault that harbor. The sales invoice the provider gave to the taxpayer stated the amount of the sales tax imposed on the sale. It provided the taxpayer notice of the amount of sales tax that would be imposed and it constituted a contract of sale between the provider and the taxpayer. As with any other contract, the taxpayer had the right to refuse to enter into the contract for the price stated. The taxpayer's unfair competition and misleading advertising claims failed because the provider complied with all applicable regulations.

  CCH Tax Research NetWork subscribers can view the opinion in its entirety.

  Yabsley v. Cingular Wireless, LLC , California Court of Appeal, Second Appellate District, Division Six, 2d Civil No. B198827, August 18, 2008.