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Lawyer’s Payouts From Tax Deal Soar Despite State Investigation

Feb. 8, 2021, 9:45 AM

A California tax lawyer who negotiated a personal cut of a sales-tax-splitting incentives deal between Best Buy Inc. and the city of Dinuba is getting his largest payouts yet as he remains under investigation for his role in arranging the deal.

Dinuba paid Robert Cendejas $2.1 million through first three quarters of 2020, bringing his total to $4.7 million since the deal took effect in 2016. His payment of $784,663 for the second quarter of 2020 was 191% more than the previous quarter and 381% more than the same quarter in 2019, thanks to the pandemic-induced e-commerce boom.

Dinuba is one of six cities that have hired Cendejas to broker tax-sharing deals, Bloomberg Tax found in a 2019 investigation of arrangements that have also benefited Apple Inc., Staples Inc. and eBay Inc. In agreements Cendejas negotiated, he included a percentage of the increased tax revenue for himself for the life of the agreements.

His role is part of a larger practice among some cities that use the tax-sharing deals to lure or keep warehouses and online sales centers to boost tax revenue. The cities leverage a 1 percentage point increment of the 7.25% statewide sales tax that goes to the location of the transaction, not the customer, under a 1950s law.

A May 2019 Bloomberg Tax story on Cendejas’s role prompted the California Fair Political Practices Commission to open an investigation for possible ethics violations. The civil investigation, which is focused on Dinuba according to FPPC records, is ongoing, the commission said last month, declining to elaborate.

The commission had advised the city of Long Beach in 2015 that allowing Cendejas to negotiate a similar agreement there would violate state law.

Under the 40-year agreement in Dinuba, the city gives Best Buy 50% of total sales tax proceeds from online orders to California customers, then gives 10% to Cendejas and two companies affiliated with him. The city keeps the remaining 40%. If a customer anywhere in California orders items from BestBuy.com including headphones, laptops, desks, and home theaters, Dinuba gets the local portion of the sales tax, regardless of where the customer is located.

Cendejas didn’t respond to a request for comment last week.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editor responsible for this story: Jeff Harrington at jharrington@bloombergtax.com

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