The incident began when Mr. Wehlou contacted Apple seeking details on how he could deduct taxes on the apps he purchased for his business use.  Though the apps were obviously business oriented, Apple perplexingly responded, "The iTunes Store sells only to customers as end-users for personal, noncommercial use."

Further, Mr. Wehlou complains that Apple told him, "the specific terms of your agreement with Apple when purchasing from the iTunes Store is that the content may not be used for commercial purposes… any attempts to claim your purchases for tax reasons would be in violation of the terms of sale."

The incident arose because the sales records from iTunes did not include information required for reclaiming the Value Added Tax (VAT) - a European sales tax.  VATs vary from member state to member state.  In the UK and Sweden, iPhone apps are considered luxury items and non-refundable taxes are applied.  For typical business items in these countries, VATs are typically applied and then refunded.

In the U.S. customers don't have to worry about these problems as their purchases are not taxed.  However, some states have moved to try and tax digital downloads, particularly those from iTunes, a tempting revenue source.  If this happens, U.S. business users may find themselves in the same boat as the Europeans.

Apple's UK terms and conditions also indicate that apps are not for business use, stating "Your license of Products as authorized hereunder permits you to use the Products only for personal, non-commercial use."

By not having to take and deduct VAT taxes from individual users, Apple saves the time of having to write specialized back-end code.  However, the bad news for Apple is that while it may save on costs, it's tarnishing the iPhone's reputation as a viable business phone -- in Europe at least.