![]() ![]() Building on the back of this, in exchange for keeping its headquarters in the city, Cupertino would give Apple half of the city’s 1% portion of the sales tax revenue generated by the company’s sales to businesses in California for at least five years. ![]() That’s also the time Apple brokered a tax-incentive deal with its hometown, Cupertino. Then, with Steve Jobs returning to the helm in 1997, things started to turn around. ![]() Steve Jobs was forced out by the board and then-CEO John Sculley in 1985, competition from rivals like IBM and Microsoft was heating up, investors were losing confidence, and Apple’s focus on high-end products and its refusal to license its software to other companies was stifling the company inside its own silo. In the 1990s, Apple nearly went bankrupt. Jim Throop, Cupertino city manager, says the city’s budget for 2022-23 “does take into consideration a potential reduction in sales tax revenue.” A brief summary of Apple’s tax agreement with Cupertino To cope, the city may well have to cut back on jobs, local events, and more until the end of this decade. That, and subsequent fines, would reduce Cupertino’s operation spending by millions, Bloomberg warns. If the CDTFA finds any accounting mismatch, Cupertino will not only have to forgo future revenues, it may also be required to return the money to the state that it received in previous years. Should the California tax authority decide to intervene, Cupertino’s local tax revenues could dropping by as much as 73% in the current fiscal year, from $42.1 million to $11.4 million, according to Bloomberg. How much tax revenue Cupertino could lose While Apple is not explicitly called out in the audit, the authorities are poking holes in the arrangement, as reported by Bloomberg. The bigger the sales tax bill Apple pays, the more money it stands to get back. Secondly, Cupertino gives the iPhone maker a 35% kickback from the total revenue it amasses from Apple’s sales tax revenue-a lure to keep the trillion-dollar company’s headquarters in the city, to create jobs and more tax revenue. Of the 7.25% tax rate in California that Apple pays on Cupertino sales, one percentage point is effectively earmarked for Cupertino. For one, Apple’s hometown gets more funding-the company is the largest source of sales tax revenue for Cupertino. Locating Apple’s California online sales in Cupertino is a win-win situation for both the company and the city. Using a 1950s law that clocks the order based on the location of the sale, not the customer, Apple treats all online purchases in the state of California as if they were made in Cupertino. This latter point puts Cupertino in a difficult spot with the authority, as under a longstanding agreement with Apple, the tax the tech giant reports in Cupertino extends well beyond city limits. The CDTFA says it maintains “a robust audit program to ensure businesses report the correct amount of tax,” including scrutinizing noncompliance or inconsistency pertaining to volumes, amounts, and locations of sales. Your anxiety brings 4 distinct superpowersĪmericans may have seen the last of big rent hikes Whole Foods has shut down a store in downtown San Francisco on safety concerns 13), Cupertino’s finance director is scheduled to appear in front of the city council to explain the findings of an audit the California Department of Tax and Fee Administration (CDTFA) launched in 2021. ![]() Apple’s tax agreement with Cupertino has fallen under California tax authority’s scrutiny. ![]()
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