Apple, Walmart Cash in on California Cities’ Tax-Sharing Deals

Seventy-nine California jurisdictions have paid $831.6 million in sales tax revenue over more than three decades to companies ranging from giants like Apple Inc. and Walmart.com to local restaurants and car dealerships, according to data disclosed for the first time.

Reports the cities and counties filed with the California Department of Tax and Fee Administration under a new state law show the terms of the agreements vary, with the oldest going back to the 1990s. The tax department posted the information on its website on Monday to comply with the new law (A.B. 2854), which was designed to shed light on how many of the tax sharing agreements exist and how much money is flowing to the companies from local governments.

The agreements leverage a 1950s state law that sends a 1 percentage point increment of the statewide 7.25% sales tax to the local government where a transaction takes place. Companies agree to locate within a jurisdiction’s borders or assign online sales statewide to their locations based on the presence of an office or a warehouse.

Although some cities post the agreements on their websites, the amounts they are paying to the companies aren’t typically disclosed. Several previously invoked taxpayer confidentiality to deny Bloomberg Tax requests under the California Public Records Act for payment information concerning the agreements, but ultimately provided the information.

Apple is the largest winner, receiving $64.7 million since 2013 from its hometown of Cupertino, according to the disclosures. This total applies to the tech giant’s current agreement, negotiated in 2013 to replace a previous agreement that began in 1998. Cupertino has paid Apple nearly $120 million since then, according to records compiled by Bloomberg Tax.

Apple recently settled a dispute with the tax department over allegations that much of the tax revenue should go to other jurisdictions where sales actually took place, such as the location of a warehouse. The department is in disputes with at least five other cities over similar issues, including San Jose regarding its agreement with eBay Inc., San Bruno’s agreement with Walmart.com, Dinuba’s agreement with Best Buy Co. Inc., and Shafter’s agreement with Williams-Sonoma Inc.

Others getting the most from local jurisdictions are building materials company Edison Materials Supply LLC, with $73.5 million in payments from Long Beach since 1999, and consulting firm Cooperative Sourcing, which has received $66 million for tax-sharing agreements it brokered between the city of Shafter and two companies—retailer Williams-Sonoma, and concrete company Cemex.

The city of Ontario, in San Bernardino County, has the most agreements with 14, and has paid a total of $63.5 million to companies including Home Depot USA Inc., Nike Retail Services Inc., QVC Inc., and two car dealers. The Black Bear Diner in Menifee, Riverside County, has received one of the smallest totals at $5,658 under an agreement in place from 2022 until 2027.

Cities had a deadline of April 30 to report to the state the total they’ve given to companies since their agreements took effect; how much they’ve paid in the previous fiscal year; how much they give to consultants who broker the deals; and the terms of their agreements, such as the percentage of total sales tax revenue they give to the companies and for how many years. They also must post the information on their websites.

The new law applies to all of California’s 482 cities and 58 counties. Of those, 16 failed to provide the information failed to meet the deadline, tax department spokesperson Tamma Adamek said in an email. They have until June 15 to provide the information. Those that fail to meet the deadline will face fines of $1,000 a day for the first 180 days and $4,000 a day thereafter.