In Apple, Inc. v. State Tax Assessor, the Maine State Tax Assessor found that the taxable sales price of iPhones sold at discounted prices to customers who entered into wireless service contracts at Apple Inc.’s retail stores did not include payments made by the wireless service carriers to Apple to “reimburse” the phone manufacturer for the discount to customers.
In reviewing the case, the Maine Supreme Judicial Court agreed with the State Tax Assessor that amounts paid by the wireless telecommunications carriers to Apple constitute part of the taxable sales prices for the phones for purposes of applying Maine sales tax. Payments from the wireless service providers to reimburse Apple for discounted phone sales were triggered by Apple’s retail sales of iPhones at reduced prices. The Court rejected Apple’s argument that these payments were “bounties” to reward Apple for finding new customers for the carriers because there was a direct linkage between phone discounts, the carriers’ payments, and the length of the wireless contracts. (Apple, Inc. v. State Tax Assessor, Maine Supreme Judicial Court, No. 2021 ME 8, February 18, 2021)