On October 27, 2020, the Sacramento Superior Court granted a writ of prohibition barring the California Department of Tax and Fee Administration (the Department) from applying  sales tax Regulation 1585 (Reg 1585) to bundled sales of cellular telephones and service by carrier-retailers.

  • Reg 1585 provides, in part, that sales tax on bundled sales of cellular telephones and service will apply to the “unbundled sales price” of the cellular telephone.
  • The decision is based on the ground that Reg 1585 conflicts with statutory definitions which require sales tax to be collected on consideration paid, not another measure of value.
  • In recent years, the Department has made several attempts to impute additional consideration to the stated sales price and require the collection of additional sales tax on many types of sales; if upheld on appeal, this decision represents a substantial win for taxpayers.

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