Cupertino Pays Apple $12.1 Million After State Sales Tax Dispute

Cupertino, California, city leaders approved $12.1 million in payments to Apple Inc. on Tuesday for the company’s share of sales tax revenue for online sales in the state since 2023, following a settlement the city reached with the state sales tax agency last year.

Quarterly payments from January 2023 through June 2024—owed under a revenue-sharing agreement with Apple—appear on a payment register the Cupertino City Council approved unanimously at its evening meeting without discussion. The collective payment comes six months after Cupertino and the California Department of Tax and Fee Administration settled a dispute over the flow of local sales tax on Apple’s sales.

Under a 27-year-old agreement, Apple has assigned all online sales in California to Cupertino, sending the city a 1-percentage-point increment of the 7.25% state sales tax that’s earmarked for local governments. Cupertino then has given Apple 35% of the revenue. With the $12.1 million payment, Cupertino has paid Apple nearly $120 million since 1998.

Representatives of Cupertino and Apple didn’t respond immediately to requests for comment.

Cupertino held onto the payments while negotiating with the sales tax department, which alleged that the city was receiving most of the sales tax revenue improperly. The case, and other similar ones with a handful of other cities, turn on where the online transactions are deemed to take place. The department’s position is that the retailers must show they participate in transactions with “genuine physical human interaction” at the locations where they assign the sales, and the presence of Apple’s headquarters in Cupertino didn’t amount to participation in most of the transactions.

The settlement allowed Cupertino to keep $75 million collected since 2021, but required Apple to start allocating some sales tax revenue to other California jurisdictions where sales actually took place, such as the location of a warehouse, starting in September 2024.

Cupertino made the payments to the same company that has received the payments since 2003: Baz Industries Inc., an entity registered as a holding company with the California Secretary of State at an address in Santa Monica. Its directors are Apple Senior Director of Corporate Law Samuel John Whittington and Director of Corporate Law Peter Denwood.