Cupertino can 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.
The city on Thursday 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. Last year, the state audit found some of Apple’s local sales tax dollars were misallocated . Under the settlement, the city will 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 $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. How the funds will be used is up to councilmembers. Cupertino was saddled with a roughly $15 million deficit due to the audit and the settlement could relieve some of that, for now.
Mayor Sheila Mohan said she didn’t have high hopes for the audit’s outcome because the city hadn’t dealt with something like this before, but is happy with the final results.
“This has definitely been really the best outcome that we could have envisioned. It’s been three years (since) this whole thing started, so we’re basically happy with how it went,” she told San José Spotlight.
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Interim Assistant City Manager Tina Kapoor said she couldn’t speak to if or how the settlement will affect the city’s tax-sharing agreements. She said Cupertino is still looking at the ongoing shift to its sales tax revenue as the city projects a deficit for the coming years due to the drop in sales tax. She said the amount of money the city will lose in sales tax revenue in 2025 is being compiled and will be shared soon.
“The settlement provides a reprieve to the city and will keep us balanced for a little bit longer,” she told San José Spotlight.
Cupertino had a longstanding agreement with Apple dating back to 1998, in which the company designates all online product sales to California residents as taking place in Cupertino, and allocates the local 1% portion of the state’s 7.25% sales tax from those transactions to the city. The city in turn gave back about a third of that tax revenue to Apple.
All that changed when the state began auditing Apple’s local sales tax allocation in 2021 and ordered the tech giant to reimburse it about $20 million because of misallocation. Cupertino was caught in the crossfire.
Nick Maduros, director of the California Department of Tax and Fee Administration, said the settlement will help get money to the right places.
“This agreement is in the best interest of the cities and counties of California,” he told San José Spotlight. “We can avoid prolonged litigation and start tax dollars flowing to the proper jurisdictions.”
Councilmember Liang Chao said the city should spend the funds conservatively.
“We (need to do) long-term planning on how we want to use this because our sales tax revenue will still take a hit,” she told San José Spotlight.
Contact Annalise Freimarck at annalise@sanjosespotlight.com or follow @annalise_ellen on X, formerly known as Twitter.
The post Settlement lets Cupertino keep millions in Apple sales tax revenue appeared first on San José Spotlight .
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