I got a call from Paul Langenwalter of La Mirada who told me that he used his two government-issued coupons to buy two digital converter boxes this morning. But the Best Buy in Brea charged him tax on the entire $120 purchase. By law, Best Buy should have only charged him tax on the post-coupon purchase of $40.

Good thing Paul had read my article that retailers aren’t allowed to charge tax on the coupons. He went all the way up to the store’s manager to get his $10 in taxes back.

He wasn’t the only one.  Another reader said he got taxed on the whole purchase at Wal-Mart. He’s going back to the store with my article to try to get his money back.

For those tuning in, the government is giving away $40 coupons (two per household) to alleviate the cost of buying a digital converter box. Not everyone needs a box. But on Feb. 17, 2009, the major TV channels will start digital broadcasts, rendering some older, analog TVs useless. But if you buy a digital converter box, the TV will work just fine. (Why is this happening? Read the background here: “Guide to the 2009 Digital TV transition.”)

I called Best Buy and the state’s Board of Equalization, which issued the tax-exempt reminder last week and asked, “What’s up?”

No response from Best Buy yet.

Over at the tax board, Anita Gore, a spokeswoman, said that this is the law, albeit not a new one. Retailers aren’t allowed to collect taxes when dealing with a government entity.

“We’re just reminding retailers that this is the law because it comes up so rarely,” she said. “Because the coupon becomes a payment from the U.S. government, it’s not a taxable amount.”

So, if the converter box is $50 and you use the $40 coupon, tax should be on $10 — not $50.

The BOE is working on sending out letters to the state’s 16,000 stores who sell digital converter boxes “as a reminder to retailers that this is the law,” she said.

If you have been charged tax, or the store doesn’t believe you, Gore recommends two things: Either print out the official notice (found here: “Tax Exemption for Digital Converter Box Coupons Issued by Federal Government“) or have the store call this phone number: 800-400-7115.

Stores that do refund the tax to consumers can also call the state’s BOE to get their own tax refund.

Related posts:

• Lost or expired digital TV converter coupons? Numbers climb
• Tax discount on digital TV converters bought with coupons
• 23 reviews of digital converter boxes
• Find a store that sells digital converter boxes
• Which (nearly) free digital TV converter box should I buy? (CNet)
• Who Acts as Tech Support for the DTV Transition? (PC Magazine)
• List of DTV converters eligible for the coupon afterdawn.com)
• Help parents survive the digital TV transition (Gadgetress)
• Guide to the 2009 Digital TV transition (Gadgetress)

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