Apple Faces Regulatory Scrutiny from Cupertino Officials for Local Tax Arrangements

After auditing Apple's tax agreement with its local hometown Cupertino, state officials from California are planning to announce changes that could result in a 73% drop in local tax revenue for the city.

Apple's Tax Agreement with Cupertino

The Department of Tax and Fee Administration of California revealed an audit of arrangements last 2021, with the finance director of Cupertino will explain the findings further to the city council tomorrow. Apple was not technically named drop in the city staff report, but the company was known as the largest source of sales of tax revenue in Cupertino alone.

Based on a report from Bloomberg, its local tax revenues could potentially result in a 73% drop in local tax revenue, with $11.4 million in the current fiscal year from $42.1 million. Apple was not technically named drop in the city staff report, but the company is known as the largest source of sales of tax revenue in Cupertino alone.

The audit focused on how Apple treated its online sales by considering all online purchases of products in California as if they were made in Cupertino. The company set aside the one percentage point local potion of the 7.25% state sales tax for the city.

Aside from online sales, the city officials clarified that this also applies to transactions of the company with other businesses in California, sales from the two retail stores in Cupertino, and tax usage for the company's own equipment purchases.

Apple remits all sales tax that it has been receiving to the state tax department and allocates the local portion to Cupertino, which resulted in the city passing on 35% of its total only for Apple. By totaling these payments, Apple has already added up $107.7 million since 1998.

Despite these, Cupertino's sales tax revenue at issue is already a small portion of the total taxes that Apple has been paying to California, Cupertino, and other jurisdictions ever since.

The agency did not comment in regards to Apple's tax arrangement but spokeswoman Tamma Adamek stated, "Our Local Revenue Branch is continually reviewing reported local revenue allocations by taxpayers to determine if those allocations are correct or need reallocation."

Cupertino's Budget Cuts

Cupertino may also be required to send back the received money from Califonia for the past few years. "This decline in revenue is due to a change in sales tax distributions based on the anticipated outcome of a state audit of one of the city's taxpayers," as per the written statement from Cupertino.

With this, 9To5Mac reported that the city is expected to cut staff and spending in order to recover from this. In preparation for developing budget-balancing strategies for the next year's budget, the city has already taken action to communicate with its council members and the whole community.