Seventy-nine California jurisdictions have paid US$831.6 million in sales tax revenue over more than three decades to companies ranging from giants like Apple and Walmart.com to local restaurants and car dealerships, according to data disclosed for the first time, reports Bloomberg.
Reports the cities and counties filed with the California Department of Tax and Fee Administration under a new state law show the terms of the agreements vary, with the oldest going back to the 1990s. The tax department posted the information on its website.
According to Bloomberg, the agreements leverage a 1950s state law that sends a one percentage point increment of the statewide 7.25% sales tax to the local government where a transaction takes place. Companies agree to locate within a jurisdiction’s borders or assign online sales statewide to their locations based on the presence of an office or a warehouse.
Apple is the largest winner, receiving $64.7 million since 2013 from its hometown of Cupertino, according to the disclosures. This total applies to the tech giant’s current agreement, negotiated in 2013 to replace a previous agreement that began in 1998. Cupertino has paid Apple nearly $120 million since then, according to records compiled by Bloomberg.
On March 6, the city of Cupertino greenlit an US$12.1 million payment to Apple to pay back sales tax revenue the city had collected from the tech giant in the last two years, according to SilconValley.com.
The amount is an accumulation of how much the city received in sales tax from Apple between January 2023 and June 2024. The money was pulled from the city’s general fund, an account that supports most of the city’s activities and is funded through taxes, according to SiliconValley.com.
Since 1998, Apple has treated all online purchases of products within California as if they were made in the city. The deal allowed Cupertino to collect 1% of Apple’s 7.25% sales tax, and a third of the revenue was returned to the company.
In October 2024, the San Jose Spotlight reported that Cupertino would be allowed to keep millions of sales tax dollars from Apple, despite a lengthy state audit questioning the city’s tax agreement that left it with a budget shortfall.
At that time the city announced a settlement with the California Department of Tax and Fee Administration, allowing Cupertino to retain sales tax revenue from Apple since the state began an audit in 2021 through August. In 2023, the state audit found some of Apple’s local sales tax dollars were misallocated. Under the settlement, the city was no longer receive the sales tax distribution the state determined should go to other jurisdictions beginning in 2025.
The Cupertino City Council set aside roughly US$77.5 million in the 2024-25 fiscal year budget for potential sales tax repayments to the state tax association, all of which it will now be able to access. The city Cupertino was saddled with a roughly $15 million deficit due to the audit and the settlement could relieve some of that, for now, according to o San Jose Spotlight.
Apple has about 25,000 employees in the Bay Area (although it’s not clear how many of these are specifically based in Cupertino). Apple is Cupertino’s largest employer, and has been for years.
In 2016, then-Cupertino mayor and now councilman Barry Chang pushed for a tax of $1,000 per employee on large companies. However, as Cult of Mac notes, the proposal went nowhere.
Cupertino is located in Santa Clara County, directly west of San Jose on the western edge of the Santa Clara Valley with portions extending into the foothills of the Santa Cruz Mountains. The population is around 60,000.
But in 2023, the California Department of Tax and Fee Administration (CDTFA) audited the city and determined the state should receive that revenue instead and the city needed to pay back any previously collected sales tax dollars.
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