Apple’s agreement with Cupertino

&gt;The agreement outlines that 35% of that local portion that is returned to Cupertino is handed by the city to Apple—to the tune of $107.7 million since 1998. California took notice and launched an audit.<p>So $4m a year?<p>&gt;The Adopted Budget is budgeted at $130,587,325 and is funded by $130,244,157 in revenue.<p>So taxpayers are “missing out” on 3% of their budget in exchange for 65% of 1% of Apple’s online sales in California. How much does the city get in return for this deal? And, wouldn’t Apple just choose somewhere else to direct the funds otherwise?<p>Apple has to choose where to allocate the tax funds. That’s the law. That Cupertino offered the best deal for them is a quirk of the law, not a shady deal by Apple. As well: their headquarters are located there. It’s not like they shopped around for the best kickback deal by allocating it to some little town on the coast.<p>&gt; Cupertino is facing a 73% reduction in local tax revenue. California is taking issue with the agreement and examining the extent to which the California purchases attributed to Cupertino are proper.<p>Err, what? There’s some math here there doesn’t add up. Did the article mean to say that Apple has contributed $107m <i>per year</i> since 1998 — so $2.6b? If so, Cupertino is facing a <i>96% reduction</i> not 73%.<p>I must be missing something here. Could someone point me in the direction of the right math?

Sounds a bit like Japan&#x27;s <i>Furusato Nozei</i>. This &quot;hometown tax&quot; allows taxpayers to choose where to send a portion of their tax payment, in order to benefit small regional towns that might otherwise be struggling with a shrinking tax base.<p>In order to thank and attract people to pay their Furusato Nozei to a particular town, the towns provide gifts as kickbacks, competing with each other by offering the best gifts. Usually it&#x27;s something associated with the local area to which the tax is paid. But in order to prevent the gifts from getting too out of control, by law the gifts are limited to 30% of the value of the tax paid...

It&#x27;s not just Apple making this kind of deal with California cities regarding sales taxes from online sales within state:<p>&gt; Best Buy has been in Dinuba for 17 years, employing around 370 workers, but seven years ago it became even more vital to this 25,000-population city. That’s when the Dinuba facility was designated as Best Buy’s sole point of e-commerce sales in California, meaning that any state resident making an online purchase would pay the local sales tax on their transaction to Dinuba, not the city where they live. That prompted Dinuba — facing a $1.9 million budget deficit — to enter into a 40-year agreement to share those tax proceeds with Best Buy.<p>&gt; It’s an arrangement that a handful of other cities have set up, including Cupertino with Apple Inc., Ontario with QVC Inc. and Nike Inc., Shafter with Williams-Sonoma Inc., San Bruno with Walmart Inc. Typically, cities commit to send half or more of the local sales tax paid on e-commerce sales in California right back to the companies, for decades, in the name of economic development.<p><a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;features&#x2F;2023-02-23&#x2F;e-commerce-sales-tax-deals-flow-to-only-some-california-cities" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;features&#x2F;2023-02-23&#x2F;e-commerc...</a>

I don&#x27;t live <i>in</i> Cupertino, but it&#x27;s right across the street (or several streets). I follow a lot of this on NextDoor.<p>Cupertino isn&#x27;t some random city; it&#x27;s where Apple has been since the beginning. They contribute massively to the traffic around here, and they could easily afford to buy the empty Vallco site and build housing for their employees, who could then walk to the Spaceship. Only now are they even talking about building teacher housing there.<p>Cupertino lets them get away with it because of all that money they&#x27;re paying. I always thought a Chicago Move would be for the city to go to Tim Cook and say, looking around appreciatively at the Spaceship,<p>&quot;Nice building you have here, Tim. What was it, five billion? Very nice. Be a shame if we had to close it down for health inspections.&quot;

In Washington state they solved this problem by allocating the sales tax to the location of the customer for online sales. I remember having to implement it as a small business and it was a minor pain, but I assume the legislators mostly had Amazon in mind when they passed the law.

&gt; <i>In California, the local portion of collected sales tax goes to the location where the transaction took place, not the location of the customer.</i><p>Well that&#x27;s clearly the root of the issue here.<p>Why?<p>Generally, across the country, for online purchases you pay sales tax for whatever the delivery address is.<p>Seems rather bizarre that California allocates the local portion of sales tax of online sales to the business location rather than customer location, no?

What’s the alternative? This seems like a non-issue as both Apple and Cupertino are just following the law as written.<p>A better article would be “big companies bring in more sales tax to the cities where they are located” and that seems as expected.<p>While imperfect, tax based on the location of purchase is most likely to be accurate. Would you tax where the person was physically located when they purchased, so vendors have to get customer geolocations at time of purchase? Where the data center is located so it depends what portion of the cloud was processing the db write? The residence of the customer so vendors have to know home address and non-california residents would pay no taxes?<p>This seems like the author is finally growing up and learning that taxes exist. I remember a friend called me when they got their first paycheck and said something like “hey, there’s like 45% missing” and they got to realize that taxes are substantial.

This article is well written but it’s really more about sales tax being a regressive tax that hits lower income people worse than high income people, and is using the Apple example for name dropping clickbait since they sell within California and the tax code is very skewed for such large cases and their resident municipalities. It’s in no way an Apple thing but is instead a flawed California taxation thing.

Vert well written article explaining how this benefits the richest company in the world and is bad for ordinary citizens. The sort of thing we should try and change, but is endemic.

<i>&quot;It isn’t difficult to imagine these sorts of agreements giving rise to bidding wars between municipalities, each vying to offer the most generous kickbacks in exchange for a large corporation allocating its state sales to that locale.&quot;</i><p>Do we need to imagine? Hasn&#x27;t this been common for decades?

&gt; It isn’t difficult to imagine these sorts of agreements giving rise to bidding wars between municipalities, each vying to offer the most generous kickbacks in exchange for a large corporation allocating its state sales to that locale.<p>&gt; This benefits no one save for the corporation with the deepest pockets.<p>I am maybe missing something? Surely it would also benefit the winning municipality, which is why they would want to bid on it.

In the age of internet sales it goes from &#x27;just tax the receiving locale (POS?)&#x27; or &#x27;just tax the company locale&#x27; to dealing with multiple entities (headquarters, warehousing, staffing, customers) all in different locations co-mingled across different state jurisdictions. Sales tax is also awfully regressive.

&quot;$107.7 million since 1998&quot; --that&#x27;s peanuts to Apple, right?<p>It may be more to the state of California or local municipalities who would be getting the money (actually 107&#x2F;35% == 305 million... still over 25 years though!).<p>But if Apple ends up getting dinged over this, they&#x27;re really going to feel like they made a mistake, this was not much benefit to be worth even bad press.<p>Maybe the Apple of 1998 was hungrier, and it just stayed there.<p>Or are those numbers wrong? Does that number seem low for 35% of the entire CA sales tax owed by Apple over 25 years?

Cupertino forgot an important rule of business: never have all your revenue come from one customer.

What an incredibly corrupt system. The state should not be letting people change where they pay tax and it absolutely should not be giving people tax back.

I don&#x27;t understand how sweetheart deals between cities or even states and companies are remotely legal under the Equal Protection Clause.

it took this many years for an article?<p>Saratoga native... everyone knew this, that guy Jobs would buy a new car every six months just to avoid a DMV visit..<p>You think that master of the masters of the con cant play a lowly municipality built on orchards into a tax haven?

A marketing piece for a flat tax.

California, which has no geographical nexus to internet sales other than being the locale in which Apple is located, is complaining about the sales tax being paid to Cupertino which is in exactly the same logical position?

&gt; Apple is receiving a kickback from the municipality for indicating that online sales to California residents are transacted in Cupertino. They’re not bringing customers to Cupertino—not physically, at least—but merely are choosing that city as where sales are made.<p>This is an openly illegal practice that is only possible by the collusion of judges. If judges accepted the totally fabricated reasons that companies provide for their behavior in murder cases, criminals could get out of prison by just arguing that &quot;the victim shot himself from 10 meters away&quot;. You know that it is impossible, the judge knows that it is impossible, but as far as the judicial system accepts it then keeps you out of prison. That &quot;sales&quot; are all assigned to a very convenient city is the same case, an obvious lie that will not pass any accounting good practice but that tribunals accept to favor big corporations, usually for kickbacks.