Apple, Cupertino’s Tax Arrangement Under Investigation

The California Department of Tax and Fee Administration, which launched an audit of the tax agreement between Apple and its hometown of Cupertino in 2021, is now set to reveal the findings to the city council.

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According to Bloomberg, the state regulators may slash the amount of money that the company sends to the city, leading to local tax revenues falling by 73% in 2023.

Based on the audit report, Cupertino’s revenue will drop to $11.4 million in the current fiscal year from $42.1 million.

The city may also be required to return money to the state that it has received in previous years, leading to layoffs and other spending cuts to cover the shortfall.

“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,” noted Cupertino in an official statement.

Apple currently treats all online sales in the state of California as if they were made in Cupertino. It then sets aside 1% of the 7.25% state sales tax for its hometown.

The arrangement applies to Apple’s online sales to consumers in the state, as well as transactions with other businesses in California.

Cupertino can appeal the tax department’s findings, with Apple bearing all costs in defending the city in administrative proceedings according to the agreement.

Apple has not issued any official statement regarding the matter.