2023-11-06 19:34:00
After a months-long audit, the California Department of Tax and Fee Administration (CDTFA) reached a decision on a tax agreement that Apple has with the municipality of Cupertino. The news isn’t exactly good for the company and it’s even worse for the city.
The main issue of this agreement is to treat, since 1998, all online purchases of Apple products in the state of California as if they were made in Cupertino, leaving aside the local 1 percentage point portion of the California state sales tax (which is 7.25%) to your hometown. The city also returned a third of the taxes to Maçã.
With the large flow of purchases during the pandemic, these terms attracted the attention of the CDTFA. According to the city mayor, Hung Weihowever, audits are also taking place regarding similar agreements that other companies have with Cupertino.
As highlighted by San José Spotlight, the Department understands that the tax allocation occurred improperly and is now asking for the process to be corrected. According to the agency’s decision, Apple needs to reimburse US$20 million to the state of California, to be relocated to other locations, covering the period from April 2021 to June 2023.
Even worse is the situation in the city of Cupertino, which must reimburse the state with US$56.5 million in taxes. To top it off, if the decision is maintained, the municipality will stop collecting, annually, US$30 million in sales taxes, which will represent a decrease in 73% in what the municipality collects.
As said by the city’s mayor, this sensitive change will have a major impact on the municipality’s public finances. Given this, municipal leaders, councilors and other people are already coming together to think regarding cost cuts, positions and how to adapt to this decrease in revenue caused by the end of the agreement.
The municipality, however, will appeal the decision, although this might take seven to ten years. California law provides that local sales taxes from internet transactions must be allocated to the jurisdiction where the item is handled by people, such as in warehouses or distribution centers. In the case of Apple, these are not exactly in Cupertino, but also in other cities.
One of the municipal managers, Matt Morley, stated that the CDTFA changed the rules for allocating taxes, as it would not have legislative authority to define physical touch as part of its interpretation of where a sale occurs. The mayor of Cupertino also said that she is in favor of the fair allocation of taxes, but that, in her view, the state’s approach of going following companies, affecting the municipality, is wrong.
Wei also stated that he hopes that state legislators can act to reverse the withholding effects, as well as update the legislation on sales taxes made over the internet, which would already be outdated. Although some employees did not directly name Apple as the company involved in this imbroglio due to confidentiality rules, others ended up confirming that it was Apple.
via AppleInsider
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