California Wants To End Cupertino's Tax Deal With Apple (appleinsider.com) 82
William Gallagher reports via Appleinsider: 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.
"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.
Apple ought to just pay it (Score:1)
Jeez, they can find that much in the couch cushions.
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That being said, fuck these tax arrangements. No money should be given back to companies for tax purposes. Ever. No deals should be made to attract a certain company to any j
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Taxes are not stealing money, fool. The free market devises more ways to steal our money than government could imagine. Your government is corrupted by the overly powerful outside of it and being a democracy, it's our fault and our corruption that is reflected in the waste and mismanagement of our tax money; not all of which goes to waste.
Perfect is the enemy of good; so a certain degree of corruption is acceptable, as long as the corruption overhead does not cost over 30% it's doing better than any sustain
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Most laws are enforced by the government via the threat of force. For example, the laws against murder are enforced by the government via the threat of force.
They are generally rules that we collectively agree are for the benefit for society. For example, we mostly agree that people should not be free to murder others.
Whether you call it theft or not, taxes are collected for the overall benefit of society. Calling it theft is a childish simplification.
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Childish myopic self-centered worldview. Such a low UID, one would generally expect some maturity. (you're probably a fan of Atlas Shrugged which admittedly, is a teenage level maturity not exactly a childish maturity...)
You benefit from and use government services we all use; most are indirect benefits and being in a civilization is not FREE it has costs. Taxes are but 1 price of civilization. YOU STEAL from all of us by your use and benefit from what we all contribute to create and you do not. We simply
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You know, before you open your mouth for something like this, you should probably suck in a bit of oxygen and give your brain a minute to start working.
The point I made was cogent, you're simply responding to it at an emotional, surface level that agrees with your opinions.
And you think that what I'm doing is a hard line complaint.
It's not.
I'm saying that any agreement with the government for incentives ALWAYS has connotations of "Pray I dot not alter it further".
The government is a voracious animal. And I
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Government reflects it's collective citizenry. Humans are savage selfish violent wasteful creatures by their nature. Government reflects the good and bad of it's humans. It's organization issues can highlight some aspects more than others and ours does reward some bad traits more than good ones.
Yes, even dictators; the people have the power but they give it up as long as being oppressed isn't as bad as they think fighting will be.
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You complain your being raped by the taxman. You may as well claim you're a victim of genocide and taxes are a holocaust in the USA. may as well overstate it all the way. You are showing you have zero experience with rape with such a comparison that actually helps real rapists.
Actually, your taxes are low. Also, the low population, almost entirely rural society, primitive life, and primitive society of the nation didn't require income tax. I will admit that handing the currency over to the bankers to contr
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No. All taxation is a form of theft. Sorry.
You "consenting" (as if you actually have a choice) is meaningless.
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Why do you people, for lack of an actual argument, always retreat to "Childish and simplistic"?
Probably because actually THINKING about the issue wholistically and in a nuanced fashion is beyond you.
Taxation is the taking of resources via use of governmental force.
Now, please tell me where I said this was always a BAD THING (or a GOOD thing).
All I did was acknowledge the REALITY of the situation.
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"Simple stuff"
Well, simple stuff is all you have a chance of barely grasping.
Actual NUANCED thought is probably beyond you.
Re:Apple ought to just pay it (Score:4, Insightful)
No, Apple should not pay these taxes, they should fight this to SCOTUS if they must.
Setting up the ability to impose a tax retroactively could be disastrous for the USA economy. Large international corporations don't have to do business in the USA to survive, they can do business elsewhere. If it is established that it is possible to impose a tax retroactively then expect states to routinely go back in time to look for things to tax. What is the limiting factor on how far back in time this can go? If there is no limit then what keeps California from imposing a tax on Apple going back to when the company was first incorporated?
I expect Apple to fight this even if the legal costs exceed whatever the tax bill would cost them. That is because if they don't kill this now then there is no telling if California would go back again to tax prior sales. With Apple being worth more than a trillion dollars they are going to be a huge target for states to try squeezing taxes from. Having so much in assets this also puts them in a good position to fight this in the courts, they can find the money to pay lawyers in their couch cushions.
Re:Apple ought to just pay it (Score:5, Insightful)
My reading of TFS is that it's not imposing a tax retroactively but auditing the tax paid and saying "You've deliberately messed up your accounting and you need to fix it".
Re: Apple ought to just pay it (Score:5, Interesting)
Everyone until now agreed upon this structure. Itâ(TM)s not that they tried to hide it, the accounting is correct. California is running out of other peopleâ(TM)s money as millions of dollars in revenue have left the state due to their own mismanagement so they need to pick it up somewhere else. Theyâ(TM)ve tried coming up with wealth taxes and taxes on people moving out of their state and even want to tax people that arenâ(TM)t in their state. Even though they had massive revenue (tax) increases in the past decade, Newsom turned that into record breaking deficit of $32B.
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Well, who else would have to agree to it. It's the city's money and Apple's money. If they had said no, it would be some other city's money, potentially not at all in California.
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No, the government isn't supposed to be unitary (it is now, but it's not supposed to be). That's why we call it federated democracy, not nationalist-socialist dictatorship.
Legislation/agreement on a topic should go from: private property -> town/city -> county -> state -> federal - only if the previous 2 parties don't agree should the next party agree to mediate.
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Except for all the times it is actually disastrous.
Will ending this be disastrous? No. But there are disastrous policies out there. Rent control, for example, ends up being disastrous to total housing and therefore prices over time.
When it comes to corporations, I believe that you need to have a balanced approach. Well, that's for pretty much everything, the question is where the exact balance should lay.
Gives Back? (Score:4, Interesting)
> The city in turn gives back about a third of that tax revenue to Apple.
Really? That's not normal.
What legal structure could authorize that?
Re:Gives Back? (Score:5, Insightful)
That's not normal.
it's more normal than you think. I used to work in local government and saw various administrations offer all sort of sweetheart tax deals to all manner of businesses, from retail to manufacturing to aerospace, trying to entice them to build within their jurisdiction. Business is adept at leveraging local governments against each other. Truly big business can leverage entire States against each other. Did you watch the disgusting process that was Amazon's selection for HQ2? I saw something very similar to this sales tax manipulation leveraged during bidding for a new airport terminal and that was (in theory) a non-profit venture owned by taxpayers.
It's not, in theory, a zero sum game. In theory the municipality gets a lot of new jobs and the tax base that comes with them. In reality, even if that happens, and it doesn't always, taxpayers still lose. SOMEONE is footing the bill for the new infrastructure and services required to cover the new business and its campuses. If the business itself isn't paying other businesses and residents are.
Re: Gives Back? (Score:2)
It's not always the case others are paying. Sometimes the infrastructure is just left to rot. Don't think that's the case in Cupertino, though.
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Usually these development deals come with requirements that the municipality make certain upgrades to roads, water, sewer, etc. It may rot in other areas if they have to rob Peter to pay Paul, but it won’t be rotting in/near the new businesses. :(
ballpark economics (Score:3)
it's more normal than you think.
Using a sports analogy, this is ballpark economics [weta.org]. If City B buys Team X a new, modern stadium then Team X will leave City A and its old stadium. The cities pay large sums of money to billionaire team owners, (i.e. corporate welfare for billionaires). Cities give away the proverbial farm in the form of free taxes in the hope of future economic gain around the stadium area they're now in debt for.
For a current example:
City A = Oakland
City B = Las Vegas
Team X = The (Oakland) A's
In fact, since the A's owner h
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It's a crappy system for sure. Cities have to figure out why it's a losing game and stop doing it. Maybe a Federal law against local bribery of businesses would work.
It's also an indirect argument why MLB needs salary caps (and in the cases of quite a few owners, salary minimums).
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The stadium stuff really does piss me off. New York tried it and backpedaled after public backlash, then, lo and behold, the Mets and Yankees managed to come up with the money on their own. Government still had to eat some infrastructure improvements but that's fine, the teams do deliver value (both economic and non-tangible), and we eat infrastructure improvements for other businesses too.
IDK how to fix it, the Yankees and Mets are big budget teams, economics are different elsewhere and some teams may g
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MLB sells a lousy online product too! I was living in DC the year I subscribed to mlb.com, the year the Washington Nationals won the World Series. Because of my location, I was simply blocked from watching the playoffs and the world series, (as if I was gonna have the 'opportunity' to pay wads of cash for the privilege of watching at the ballpark, as if I was 'denying' MLB of revenue). No more MLB for me -- I tried to enjoy their lousy product. Why cheer for a local team when they do that to you? I don't th
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Apple pioneered it. They did it in Ireland too, set up some facilities and manufacturing there in exchange for very generous tax arrangements.
After Ireland joined the EU it was mostly ruled to be illegal state aid, but Apple still benefits from being officially an Irish company but practically based in California.
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If I'm not mistaken, you're thinking of a Dutch Sandwich [dukeunderg...gazine.org]. I'm not so sure Apple invented it -- I think the Rolling Stones have enjoyed it [nytimes.com] longer than Apple. I also don't think Apple ever manufactured anything in Ireland. Everything Apple did in Ireland was just a licensed entity for tax purposes I think. (I think, because that's all the research I'm willing to do now)
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Macs used to be assembled in Ireland.
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Ireland is actually home to the last remaining Apple 'factory' in the world. (Factory in quotes because the last time they talked about it they only did final assembly on a few custom config iMac models, I'm not exactly sure what they do there now, but it still exists.)
I'm not saying Apple's Ireland operation isn't also a tax scam, because it absolutely is, and that's its primary purpose. But they did actually make computers there years ago.
For a company with their logo on products everywhere, Apple essen
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That's partially true.
>Apple pioneered it. They did it in Ireland too, set up some facilities and manufacturing there to take advantage of a ten year 'tax holiday'. This was a deal open to other companies. Apple set-up manufacturing back in 1980, and the EU Commission's investigation took issue tax agreements beginning in 1991.
>After Ireland joined the EU it was mostly ruled to be illegal state aid, but Apple still benefits from being officially an Irish company but practically based in California.
Ire
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What legal structure could authorize that?
Quite a few actually. Consider things like businesses that offer to pay your deductible if you buy from them. Then you have the police and "civil asset forfeiture" in states that have banned the practice. The solution? "Partner" with the Feds like the FBI, the FBI does the forfeiture and splits the money with the local agency.
I'll note that civil asset forfeiture is a glowing white hot issue to me where this is merely lukewarm. CAF hits individuals, not the government, it's blatantly unconstitutional (
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I'll note that civil asset forfeiture is a glowing white hot issue to me where this is merely lukewarm. CAF hits individuals, not the government, it's blatantly unconstitutional (my opinion), it promotes corruption in our police, etc...
Given that the dual rights to ethical practice of law and ethical government arise under the 9th Amendment (as rights retained by the people) and the 10th Amendment (as rights reserved to the people), and the constitutional requirement of 'good behavior', there is no doubt at all that these policies are unconstitutional.
Unfortunately, America's legal profession makes somewhere around 2-3x what their counterparts in other developed nations make as a fraction of GDP - this is statistical, meaning as a group,
Re: Gives Back? (Score:2)
It's not always the promised bonanza for cities or states, but the theory is that business revenue from supporting small businesses, income tax revenue from thousands of workers, inventory tax, business equipment tax, letting in other new businesses who wanna be close, etc. will more than make up for the discount.
Smart governments have learned to look really close at these and build in clauses so that the businesses have to deliver to get the breaks.
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The same one used state and nationwide which grants tax abatements as a means of attracting and/or retaining businesses?
Cupertino's Tax Array Out of Bounds (Score:2)
Cry me a fucking river.... (Score:5, Interesting)
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.
You know where they could find $56.5M pretty quickly? Property taxes. I have it on good authority there's a very large five billion dollar property [wikipedia.org] within their jurisdiction. That's a 1.13% hike in the commercial property tax. Actually, less, because I very much doubt that's the only commercial property in their city. Why the fuck should they get a sweetheart deal that screws over every other jurisdiction in the State?
Were they one of the shortsighted cities that gave a big business a sweetheart deal on property taxes in exchange for the illusion of an economic boost? You'd think they learn. Those deals very rarely manage to recoup external costs (e.g., additional road maintenance/construction, added police and fire personnel, etc.) absorbed by the municipality.
But hey, the ribbon cutting is a great photo op for the administration currently in power, and they'll be long out of office before the bill comes due.
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Property taxes are set by Santa Clara County, and 10% of that goes to the city where the property tax is collected [ref] [sccgov.org]. It's not something Cupertino could alter without changing a lot of the state-wide rules for property tax in California. Other states don't have this problem but those states have really contentious millage initiatives.
Last year the county collected $34m from Apple. Which means Cupertino got something less than $3.4m from property tax (if not all over Apple's property is in Cupertino)
Cali
Will Apple stay in Cupertino? (Score:2)
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They spent five billion dollars on their HQ in Cupertino. That's a pretty big investment to walk away from. Not to mention all of the talent that lives there, not all of which will be willing to move elsewhere, or is so easily replaced.
Sunk cost fallacy (Score:3)
Apple would walk away from that property if the government makes that the right thing to do, "investment" be damned. Besides, the value of it to Apple is not 5 billion. Certainly not after covid.
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They spent five billion dollars on their HQ in Cupertino. That's a pretty big investment to walk away from.
Renting out portions of the property is an option. I'd guess that this would be high value real estate that could fetch them some good income, good enough to keep the property in spite of the taxes. Even if Apple doesn't keep the property it's not like the building would be torn down, they'd take the money from any sale and run off to somewhere else. California might try to impose some tax on Apple for leaving the state but if there's no part of Apple remaining in the state then they don't have much leve
Apple Austin (Score:2)
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I'm sure many other states would do this. New York, Texas, Florida, and others would definitely give Apple a sweetheart deal, at the minimum a tax abatement, if not negative taxes, in order for a high Apple presence there.
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How many other places in the US would line up to offer Apple a better tax deal?
How many places outside the USA would line up to offer Apple a better tax deal?
If California is permitted to impose a retroactive tax then that sets a precedent for other states to impose retroactive taxes. I suspect that if California gets away with this in the courts then Apple will make it publicly known that they are looking for places that will protect them from retroactive taxes in the future. It will be difficult to offer such protections in the USA if federal courts allow any retroactive tax to go
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The state government doesn't even want the money, they just want the city of Cupertino to spend it in a different way.
Matters are somewhat complicated in that if a city isn't spending money in the right way, they can end up asking the state for funding to fix the problem. I don't know if this has happened in Cupertino. But we have major problems in nearby Santa Cruz and have multiple projects that are receiving state funding right now.
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The state government doesn't even want the money, they just want the city of Cupertino to spend it in a different way.
No - if this goes as the state wants, the state is taking that money away from Cupertino - and giving it to other cities.
It looks like the state is saying the sales tax should be calculated as where the customer was, while Apple said the sale should be where they (as the seller) were. Since there are appeals to be made here, it looks like this isn't something that has a definitive legal answer.
Possibly Apple will also wind up paying more in sales tax that will go to certain locations - for example if a sa
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But we have major problems in nearby Santa Cruz and have multiple projects that are receiving state funding right now.
You mean like the rail line+trail project? That's going to pay dividends for decades to come.
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At what point do any of California's passenger rail lines not require subsidies and begin to "pay dividends"?
Oh, you poor child, you're thinking of it solely in terms of tax revenue or some other ignorance like that, aren't you? But not only will it do that (in enablement of tourism alone) but it will also pay dividends of value to residents. Right now getting across Santa Cruz county at any time of day when people are awake and about is a fucking nightmare. Because it is a small strip of land between the mountains and the sea, the total maximum road throughput between the ends of the county is minuscule compared
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It's just someone trying to stir up shit using a variation on evil corporation not paying its fair share.
But fair share of what? As times get better, government should be doing less and less. But it grows larger per person. Why? Because politicians want power, and the more they lavish, the more they get votes...and the more things they can hide corruption behind.
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"Then under the same deal, Cupertino actually returns approximately one third of this revenue to Apple"
If that doesn't stink of a backhander and dodgy accounting processes to get around rules, I don't know what does.
The real headline (Score:3)
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It's time for Apple to move (Score:2)
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Texas stands ready to set Apple up. Well, all them but Greg Abbott. He's sitting but feels the same way.
Not a fan of Apple, but... (Score:1)
Reminds me of... (Score:2)
...that tax loophole MS used at for their data center aka their "server farm" in Quincy, Washington.
Unconstitutional (Score:2)
All these tax preferences and rebates should be illegal, and are obviously unconstitutional under at least the 14th amendment. You can't just pick and choose who pays a tax based on whether you like them.