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Is it legal to charge sales tax for the full price of the item before insurance instead of the discounted amount after insurance in the state of CA? The good is being shipped from outside of CA.

More context: An online eyeglass website that is owned by a vision insurance company charges sales taxes on the full price (before the insurance) instead of the amount you pay as someone with that particular insurance plan. Wanted to know whether this is illegal and if so how one can complain about it?

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  • My guess is that it's actually required. Otherwise there'd be a sales tax loophole. If I sell you a widget for $100, I have to add $7.25 for tax and remit that to the state. Now suppose I sell you an insurance policy for $90, which pays $90 toward the widget. If sales tax were only due on $10, then this trick has deprived the state of 7.25% of $90. So I doubt that they allow it. Aug 19, 2023 at 5:17
  • Now, I guess you could argue that the insurance company ought to be paying the remaining share of the tax. But that would be subject to whatever was in the policy that you agreed to. Aug 19, 2023 at 5:18

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The price doesn’t change because someone else pays

The price is the price. The fact that you have an agreement with someone else to pay part of it doesn’t change the price.

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    I found this which to my understanding seems to suggest otherwise, not sure about the illegality though. cdtfa.ca.gov/lawguides/vol2/suta/135-0370.html The good is being shipped from outside CA.
    – user127776
    Aug 19, 2023 at 10:34
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    @user127776 that annotation applies to things the insurance company is buying for its own use, not to things it or its subsidiary sells to an insured party.
    – phoog
    Aug 23, 2023 at 8:11
  • While this answer may be correct, some citation to how California law defines price for sales tax purposes would greatly improve it. For instance, why is the insurance company not required to pay sales tax on the portion of the price it pays?
    – Ryan M
    Aug 24, 2023 at 20:45
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    Actually, this frequently isn't the case in U.S. healthcare. Often there is one price for insured patients and another price for uninsured patients and yet another price for patients with Medicare, and another one for patients with Medicaid. This is before the insurance company actually pays anything. There is also often a cash price and a different credit price for uninsured people.
    – ohwilleke
    Sep 22, 2023 at 15:28

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