In California charged the full retail tax and the tax is applied BEFORE any promotions or credits from what I remember. I haven't been in California in a while.
Are trade-ins taxable?
Yes. The value of a trade-in is considered taxable. For example, if you sold a car for $20,000 and accepted a trade-in valued at $4,000 as partial payment, tax would be based on the $20,000 selling price (that is, you would not deduct the value of the trade-in from the sales price of the car being sold when computing sales tax).
As far as trade ins go.
It is legal because you state REQUIRES it to do business in California. Verizon has no choice in the matter if they want to do business there.
If I goto buy a car and the msrp is 20k. and I get the deal down to dealer invoice of lets say 15k. I'm only taxed on the 15k. Then whatever rebates come in I'm taxed still on the 15k even if the rebates from the dealer bring it down to 10k.
MSRP is a suggestion and not the selling price. If the manufacturer of the car didn't suggest it and marked the price as 20K(like electronics) you'd pay tax on the 20K.
California tax laws I disliked when I was living up there and I still hate them now every time I visit.