California wants to end Cupertino's tax deal with Apple

AppleInsider

Apple's home city of Cupertino faces losing almost $60 million after California authorities declare that the company's tax should be shared across the state.

Apple Park

In a move similar in principle to how the EU retrospectively sought to fine Apple over its tax agreement with Ireland, the California Department of Tax and Fee Administration (CDTFA) is changing the company's arrangement with Cupertino. Since 1998, Apple has declared all of its online sales made in California as having taken place in Cupertino.

As first spotted by the San Jose Spotlight, this means that of Apple's 7.25% sales tax, the local 1% portion goes to the city. Then under the same deal, Cupertino actually returns approximately one third of this revenue to Apple.

Consequently the benefit to Apple is clear, but also Cupertino profits because it sees significantly greater sales tax revenue than it otherwise might.

"The CDTFA has done an audit of one of our big taxpayers and has identified that there are dollars being allocated improperly," Cupertino Assistant City Manager Matt Morley told the publication, "and through that audit they are asking for that process to be corrected."

"The city obviously isn't happy with this and we don't believe the CDTFA is on base," continued Morley.

Reportedly, the CDTFA's state tax officials have concluded that the city of Cupertino owes it $56.5 million. This is for the period from April 2021 to June 2023, though it's not clear how those dates were determined.

At the same time, the tax officials are said to have decided that Apple must reimburse the state $20 million. This figure would then be reallocated to other areas of the state.

The impact on Cupertino could be significant, but the city is appealing the ruling -- and the appeal could take anywhere from seven to ten years. Even so, the Cupertino City Council has agreed to set aside the $56.5 million to prepare for the potential future loss.

Should the CDTFA prevail, Cupertino's Morley said non-essential city services could be reduced or even cut. Annually, Cupertino would see a 73% drop in sales tax revenues, and would face having to cut almost a quarter of its operational costs.

It's important to note that the San Jose Spotlight says Apple has not officially been named in the present discussions. But it also says that sources among the city leaders have indicated that the company concerned is Apple, and others "have slipped out such confidential information" during a public meeting.

Apple has not commented.

Read on AppleInsider

rob53

This doesn't make sense. Sales tax varies in every country/city depending on the local sales tax being added to support the local county/city. Apple, like any other company, is subject to state and local taxes so why is CA trying to take part of the local tax? Is this being done for every company in CA? If so, then it should not be included in the sales tax calculation but in corporate tax calculations. Local schools, utilities and public businesses (police, fire, etc.) depend on the local sale tax. Spreading it out among the entire state might sound like a good idea but I bet a high percentage of that money would go to the cities that need it the least (or the rich cities that vote against local sales tax increases--look at some of CA's cities with the most money and their streets suck!).

darkvader

So, Cupertino and Apple conspired to embezzle the local sales tax from every other city in the state by pretending all sales in California were made in Cupertino, and then Cupertino gave Apple a kickback.

This doesn't just sound a little shady, it sounds criminal.

eriamjh

There’s likely some information missing here, but a portion of sales tax going back to a company?   That’s fishy. 

rob53

eriamjh said:

There’s likely some information missing here, but a portion of sales tax going back to a company?   That’s fishy. 

Local sales tax goes to local businesses so I can see Apple receiving some of these taxes to support police, fire, utility companies and whatever else might benefit Apple. Apple is a huge employer in Cupertino. Until they list what every company in CA provides in taxes and what portion of those taxes goes back to these companies, including Apple (directly and indirectly), we can only speculate on whether Apple and Cupertino has done anything wrong. Of course, we probably won’t hear about this again if Apple hasn’t done anything wrong. 

jdw

It's sad but unsurprising to see people squabble about how legalized theft (i.e., taxation) is distributed.  When somebody lifts your wallet and steals something from it, it's considered theft that is prohibited by law.  But when the government says it will do the same for the greater good, somehow that's A-OK.  Pro-tax people will come out of the woodwork citing roads, bridges, schools and all manner of glorious things legalized theft has funded and is continuing to fund.  But all those things, however good, still are paid for with stolen money.  "Stolen" in that it was taken without giving the tax payer a choice not to pay it.

Regardless of the arguable need for taxation, it's still legalized theft.  No matter how much good it does, theft is theft.  As such, everybody in the business of redistributing the stolen loot is "a little shady." That remains true even when you consider that some theft via taxation is deemed necessary for our current lawless and loveless society to survive.  Despite the need, taxation is still "theft."  I repeat this refrain only because most people refuse to call it what it actually is.

So let's get off the high horses and admit taxation is theft so that "shady" and "criminal" and "embezzle" terms can be thrown in the garbage where they belong.  

Money doesn't typically solve problems.  It more often creates them.  That's yet another thing most people still haven't figured out.  

Real change begins in the human heart, doing things for the good of one's fellow man without being compelled by force.  Only then will you see meaningful change in society.  For now, society fights fire with fire, calls one type of theft bad and another type of theft good.  It's a highly imperfect system we have, but most people brush it off by saying, "no society is perfect."  Of course, that's just a cover to maintain the status quo.  And so the infighting over stolen loot continues.

Deep breath.

Now we move on to the next news story.

mikethemartian

rob53 said:

This doesn't make sense. Sales tax varies in every country/city depending on the local sales tax being added to support the local county/city. Apple, like any other company, is subject to state and local taxes so why is CA trying to take part of the local tax? Is this being done for every company in CA? If so, then it should not be included in the sales tax calculation but in corporate tax calculations. Local schools, utilities and public businesses (police, fire, etc.) depend on the local sale tax. Spreading it out among the entire state might sound like a good idea but I bet a high percentage of that money would go to the cities that need it the least (or the rich cities that vote against local sales tax increases--look at some of CA's cities with the most money and their streets suck!).

Unlike the relationship between the federal government and the states which is defined in the US Constitution, the relationship between a state and its municipalities is unitary.

ceedub

This is the same deal Amazon made when they were first building warehouses in California. All the sales routed through an individual warehouse were credited towards the jurisdiction where the warehouse was located. The jurisdiction got an excess of sales tax revenue, and kicked back a portion of that to Amazon. This benefited both parties, because while the jurisdiction gave up revenue, they got it back in other ways from the newly created jobs from the warehouse.
I'm not advocating on either side of this issue, just pointing out that this has been common practice in California since the early days of online sales.

kestral

Governments do not create value and take from the productive through taxes. Parasites.

godofbiscuits

jdw said:

It's sad but unsurprising to see people squabble about how legalized theft (i.e., taxation) is distributed.  When somebody lifts your wallet and steals something from it, it's considered theft that is prohibited by law.  But when the government says it will do the same for the greater good, somehow that's A-OK.  Pro-tax people will come out of the woodwork citing roads, bridges, schools and all manner of glorious things legalized theft has funded and is continuing to fund.  But all those things, however good, still are paid for with stolen money.  "Stolen" in that it was taken without giving the tax payer a choice not to pay it.

Regardless of the arguable need for taxation, it's still legalized theft.  No matter how much good it does, theft is theft.  As such, everybody in the business of redistributing the stolen loot is "a little shady." That remains true even when you consider that some theft via taxation is deemed necessary for our current lawless and loveless society to survive.  Despite the need, taxation is still "theft."  I repeat this refrain only because most people refuse to call it what it actually is.

So let's get off the high horses and admit taxation is theft so that "shady" and "criminal" and "embezzle" terms can be thrown in the garbage where they belong.  

Money doesn't typically solve problems.  It more often creates them.  That's yet another thing most people still haven't figured out.  

Real change begins in the human heart, doing things for the good of one's fellow man without being compelled by force.  Only then will you see meaningful change in society.  For now, society fights fire with fire, calls one type of theft bad and another type of theft good.  It's a highly imperfect system we have, but most people brush it off by saying, "no society is perfect."  Of course, that's just a cover to maintain the status quo.  And so the infighting over stolen loot continues.

Deep breath.

Now we move on to the next news story.

And sometimes people steal dictionaries and try to rewrite reality.  Redefining "tax" and "choice" is practically a necessity to support the arguments made.  People are refusing to call it what you do.

Corporations may be treated like persons, but that doesn't mean "matters of the human heart" have any place here.  And who really thinks that?  For real?

godofbiscuits

kestral said:

Governments do not create value and take from the productive through taxes. Parasites.

You're using the internet, drinking clean (for now) water , breathing clean (for now) air, possibly using roadways with the expectation that way finding information is in place and standardized, and that other vehicles on the roadway are similarly equipped with safety and signaling devices and are in reasonable working condition. 

StrangeDays

darkvader said:

So, Cupertino and Apple conspired to embezzle the local sales tax from every other city in the state by pretending all sales in California were made in Cupertino, and then Cupertino gave Apple a kickback.

This doesn't just sound a little shady, it sounds criminal.

Where’s your accounting law degree from? What’s that? You don’t have one? Or any relevant experience the field? Oh…ok. Let me place your conclusion in the circular file. 

StrangeDays

kestral said:

Governments do not create value and take from the productive through taxes. Parasites.

…which is used to build and support the civil and social infrastructure corporations require to exist. If you want to claim parasite, look no further than corporations and billionaires that leech onto infrastructure yet pay no income tax. (Apple however is the biggest US taxpayer)

get serious

jdw said:

 "Stolen" in that it was taken without giving the tax payer a choice not to pay it.”
Now we move on to the next news story.

So certainly government “the other taxpayers” would be able to limit those not paying to access whether it be roads, health care, fire and police. 

davidw

Too many here don't quite understand what's going on. It more about various governments being greedy than that of any greed by Apple.

in a nutshell, when Apple makes an online sale from their online  Apple Store, Apple collects the sales tax base on where the sale is shipped to and then remit that sales tax to the governments involve. So if a person in Dallas, TX makes an Apple Store online purchase, Apple collects the State and Local sales tax for Dallas, TX and remit it to TX and Dallas.(Or maybe just to TX and TX turns over the portion to Dallas.)  If they make an online sale to a person in OR, they collect no sales tax. And they do it like this for all Cities, States and Countries, based on where the purchase is shipped to.

But if an online purchase was made from CA, no matter where the purchase was shipped to in CA, Apple collect the State and Local sales tax as though it was shipped to Cupertino, CA and then remit the State portion to CA and the Local portion to Cupertino. For the State, this deal don't affect what they collect. The State portion of the sales tax is the same no matter where a sale in made in CA. However, the local portion of the sales tax varies and is suppose to be remitted to the various local governments. Like how it's done for out of state online purchases. So by making it so that all in-State purchases were made from Cupertino, Cupertino got all of the local sales tax portion that Apple collected on in-State online purchases. Then Cupertino would give Apple a tax rebate for doing it this way.

But there's nothing really illegal about doing this way. it's as though a person who lives in Los Angeles, CA were to walk into an Apple Store in Cupertino and made a purchase. They would pay the State and Local sales tax for Cupertino, not that for Los Angeles. And if a local business in Los Angeles were to take orders over the telephone or internet, they would collect the sales tax as though the purchase was made from their store in Los Angeles and then remit it to CA and Los Angeles. Imagine the bookkeeping headaches involve if every local brick and mortar business had to collect the local sales tax on purchases base on where the purchasers lived rather than where the purchase was made? And then remit that local sales tax to all the different cities where their customers lived. Imagine the headache for a pizza parlor located near the city border, if they had to collect the local tax for a delivery made to a customer that lives in the next city over, that might have a higher or lower local sales tax than the city where the pizza parlor is located and remit that tax collected to that city. So there is some sort of precedence of collecting CA sales tax, the way Apple is doing it. Of course, this was before purchasing online became a major and now normal, way for consumers to buy stuff. Even if there's no saving involve with the online purchase, except for not having to pay for gas, parking or paying for transportation, to shop at a local store. Plus the time.

But the biggest complainers about this deal (and this was about when Apple moved into their new HQ in Cupertino) were the cities of Sacramento and Los Angeles (and maybe a few other cities by now). That's because the main Apple warehouses in CA are located there and it's where most of the online purchases are shipped from. (But some items might be shipped directly from a CA Apple Store because they have it in stock or it saves on shipping if the CA purchaser lives near by and then Apple would remit the local tax collected to the city of that Apple Store.) But Sacramento and Los Angeles  wants a piece of that CA local sales tax that Apple collects and remits only to Cupertino. And CA government is on their side as they are claiming that because Sacramento and Los Angeles are not getting their "fair share" of the local tax Apple collect on CA online purchases, the State must make up for it when they spend more than what they are collecting in local sales tax now. (But just about every city spends more than what they collect in taxes. ) There is nothing really illegal about the tax rebate Apple is getting, as local government makes tax rebate deals all the time, to attract businesses to open a store or have their HQ located in the city. The benefit of having more businesses operating in the city out  weights any tax rebate. The State government should have no or little say on how local cities spend the local sales tax they collect.

Well, it turned out to be a big nutshell.

Calvin_Hobbes

davidw said:

… as local government makes tax rebate deals all the time, to attract businesses to open a store or have their HQ located in the city. The benefit of having more businesses operating in the city out  weights any tax rebate. The State government should have no or little say on how local cities spend the local sales tax they collect. 

You hit the nail on the head. State and local governments give special tax consideration in order to lure corporations because their presence ultimately is a boon for state and local economies. Not to mention the huge economic benefit of job creation, and the fact that employees will relocate to work for the corporation and then will contribute to the economy by spending and paying taxes. Let's not make this into something it's not.

Oh, and don't forget this is California we're talking about. The Golden State is desperate for tax dollars and doing everything in its power to strong-arm its current and even former residents.

baconstang

I've never dealt with the CDTFA.  However, the California Franchise Tax Board (FTB) is no joke.  They make the IRS seem warm and cuddly.

greginprague

StrangeDays said:

kestral said:

Governments do not create value and take from the productive through taxes. Parasites.

…which is used to build and support the civil and social infrastructure corporations require to exist. If you want to claim parasite, look no further than corporations and billionaires that leech onto infrastructure yet pay no income tax. (Apple however is the biggest US taxpayer)

https://www.cnbc.com/video/2021/12/15/elon-musk-to-pay-record-high-12-billion-tax-bill.html

Billionaire paying the highest tax bill in history.  What billionaire paid no income tax?  Trump isn’t a billionaire by the way.

kellie

godofbiscuits said:

kestral said:

Governments do not create value and take from the productive through taxes. Parasites.

You're using the internet, drinking clean (for now) water , breathing clean (for now) air, possibly using roadways with the expectation that way finding information is in place and standardized, and that other vehicles on the roadway are similarly equipped with safety and signaling devices and are in reasonable working condition. 

You shouldn’t be so critical of someone who sees the failures of government and the force through which they confiscate money from people through taxation and the threat of imprisonment. Listening to you, it seems you do not see any shortcomings in government.  Less government and less regulation is almost always better than the opposite.  I hope you will realize this as you watch California continue its loss of population, wealth, tax base and grandeur it once had. 

gatorguy

Calvin_Hobbes said:

davidw said:

… as local government makes tax rebate deals all the time, to attract businesses to open a store or have their HQ located in the city. The benefit of having more businesses operating in the city out  weights any tax rebate. The State government should have no or little say on how local cities spend the local sales tax they collect. 

You hit the nail on the head. State and local governments give special tax consideration in order to lure corporations because their presence ultimately is a boon for state and local economies. Not to mention the huge economic benefit of job creation, and the fact that employees will relocate to work for the corporation and then will contribute to the economy by spending and paying taxes. Let's not make this into something it's not.

Oh, and don't forget this is California we're talking about. The Golden State is desperate for tax dollars and doing everything in its power to strong-arm its current and even former residents.

Isn't it normally local property taxes that are rebated or forgiven and not sales tax? 

EDIT: It appears that in California it is not uncommon.
https://lao.ca.gov/2007/sales_tax/sales_tax_012407.aspx#:~:text=In the case of sales,sales tax to the business.

auxio

jdw said:

It's sad but unsurprising to see people squabble about how legalized theft (i.e., taxation) is distributed.  When somebody lifts your wallet and steals something from it, it's considered theft that is prohibited by law.  But when the government says it will do the same for the greater good, somehow that's A-OK.  Pro-tax people will come out of the woodwork citing roads, bridges, schools and all manner of glorious things legalized theft has funded and is continuing to fund.  But all those things, however good, still are paid for with stolen money.  "Stolen" in that it was taken without giving the tax payer a choice not to pay it.

You do have a choice not to pay anything: move to a deserted area of the world and live in a cave or similar shelter. Forgo all the comforts that have been afforded human beings through gathering together in groups and building things together (civilization) over the past 6000 or so years, and live by your own means. Only then can you truly say that you're not dependent on the work of others (and thus owe them something) to exist.

Look, I get that when you're surrounded by people who have scammed their way to the top in business and in government, and abuse those positions of power for personal gain, it's easy to get jaded. But the solution is to keep finding ways to prevent that abuse of power (i.e. get closer to government which truly represents the interests of people and not just the individuals within it) rather than completely eliminating government and truly having a world which is purely based on personal interests (power/profit). And don't get into that "invisible hand" which will align corporate interest with public interest, because for every case of government corruption you can point out, I can find the same with corporate corruption. And without laws, voting, public debate, public protest, and other democratic tools which can be used to get rid of corrupt governments, how do you plan on preventing that corporate corruption?