A new report from Bloomberg details that the tax agreement between Apple and your hometown, Cupertino (California), is under the scrutiny of state regulators, a situation that might result in a reduction in the amount of money the company sends to the city.
The California Department of Tax and Fee Administration (CDTFA) launched an audit of the deal in 2021, so Cupertino’s chief financial officer is now expected to explain the findings to the city council.
Although Apple is not mentioned in the report, the company is the largest source of revenue for sales tax of Cupertino, which generates a concern mainly around the company’s business in the region, since, according to California law, a portion of the sales tax goes to the place where the transaction takes place.
Accordingly, Apple treats all online purchases of products in the state of California as if they were made in Cupertino, excluding the 1 percentage point local share of state sales tax (which is 7.25%) for your hometown. The agreement applies to Apple’s online sales to consumers in the state, as well as transactions with other companies in California, as well as sales at its two retail stores in Cupertino and purchases of the company’s own equipment.
Apple then remits all sales tax it receives to the state tax department, which allocates the local portion to Cupertino. The city transfers 35% of its total to Apple — payments that have totaled US$107.7 million since 1998, according to the records seen by the Bloomberg.
Even so, the sales tax revenue in question in Cupertino is a small portion of the total tax Apple pays to California, the city and other jurisdictions, which has troubled the regulator.
Our Local Revenue Division is continually reviewing taxpayer-reported local revenue allocations to determine whether these allocations are correct or in need of reallocation.
According to reports, Cupertino may appeal the tax department’s findings. In addition, under the agreement between Apple and the city, the company bears all defense costs in administrative proceedings “related to the question of whether the city is the appropriate location for the point of sale”.
New offices in Cupertino
Still regarding Cupertino, Apple is planning to build a new office building to replace an old unit, also its, in the municipality — a project that will be voted on today in a public hearing with local residents, according to the 9to5Mac.
More precisely, Apple is planning to develop a 4-story building of over 26,000 square meters on a plot of over 32,000m², on the corner of Vallco Parkway and North Tantau Avenue, replacing a current building that has just over 13,000 m².
The building currently accommodates 700 workers, so the offices in the new building might provide enough space for 1,400 employees, as well as include retail space and a restaurant.
We will continue to monitor these plans, therefore.
