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Free Smart Phones Not So Free

Cell phone fees pkgSOUTH HADLEY, Mass. (WGGB) — If you have a cell phone, you’ve probably been offered a free phone to sign a service contract. But you might want to read the fine print, because free comes with a price.

Buying a cell phone can be a taxing experience – in more ways than one.

They now come in a dizzying array of styles, with dozens of features and accessories. And the price tags – they’ve also changed. Unless you sign a contract.

“Some of these smart phones now to encourage people to get into the smart phone generation are free so you’re getting a $600 phone for free,” said Todd Demers, president & CEO of Family Wireless stores in Western Mass.

Technically, Demers is right. But the devil’s in the details. Even though you’re not paying any money for the phone, you’re still going to pay money.

“The issue that’s created there is that the state of Massachusetts says we need to collect tax on that in some way, shape or form,” explained Demers.

The state says you, the consumer, are responsible for sales tax on the retail price of your phone, even if the real price of your phone is nothing. A perfect example would be the Samsung Galaxy Stellar smart phone. It’s free with a 2 year service agreement. But the retail price is $350. So, you’d pay 6.25 percent of 350 dollars – or about $22.

But get an iPhone 5, which can retail for $650 and you’ll really feel pinch

“Some people are just extraordinarily distraught when they have a situation where the taxes are like $40 or $50 on one of these phones that is free,” said Demers.

And that’s not all. You’ll need to tack on a service charge, something all major providers do now.

That will run you another $30.

“There are a lot of extra expenses for storing information, for bandwidth, for pictures. All your applications being backed up on what seem people call the cloud,” said Demers.

So be prepared. Paying for that cloud can be sky high, and so can that free phone.

Sales tax on cell phones – even free ones – is nothing new. Most people are now noticing, however, because the retail price of phones has increased dramatically with the introduction of smart phones.


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