[HN Gopher] Apple's agreement with Cupertino
___________________________________________________________________
Apple's agreement with Cupertino
Author : tldrthelaw
Score : 155 points
Date : 2023-04-18 11:51 UTC (11 hours ago)
(HTM) web link (news.bloombergtax.com)
(TXT) w3m dump (news.bloombergtax.com)
| [deleted]
| wilg wrote:
| > It isn't difficult to imagine these sorts of agreements giving
| rise to bidding wars between municipalities, each vying to offer
| the most generous kickbacks in exchange for a large corporation
| allocating its state sales to that locale.
|
| > This benefits no one save for the corporation with the deepest
| pockets.
|
| I am maybe missing something? Surely it would also benefit the
| winning municipality, which is why they would want to bid on it.
| jjtheblunt wrote:
| This article is well written but it's really more about sales tax
| being a regressive tax that hits lower income people worse than
| high income people, and is using the Apple example for name
| dropping clickbait since they sell within California and the tax
| code is very skewed for such large cases and their resident
| municipalities. It's in no way an Apple thing but is instead a
| flawed California taxation thing.
| dimitrios1 wrote:
| Don't most municipalities charge lower / no-sales tax on
| essentials such as groceries, and higher sales tax on retail,
| alcohol sales, and restaurants, presumably things lower income
| people wouldn't be spending much on anyways? I know my state
| does not charge sales tax on groceries, and limits local
| municipalities to a maximum of 2%, but I admittedly don't know
| what the norm is in most states.
| ghiculescu wrote:
| Yeah it seems like this would be an issue no matter which city
| Apple chose.
| dragonwriter wrote:
| > This article is well written but it's really more about sales
| tax being a regressive tax that hits lower income people worse
| than high income people
|
| No, while it mentions that issue, its mostly about the race-to-
| the-bottom opportunity for large corporations created by the
| ability of corporations to choose to assign the location of
| sale unrelated to where it actually occurred in any meaningful
| sense, and to leverage that to get kickbacks from local
| government
|
| > and is using the Apple example for name dropping clickbait
| since they sell within California and the tax code is very
| skewed for such large cases and their resident municipalities.
|
| No, its using the Apple deal as an example because it is by far
| the largest example of the issue it is highlighting.
| dragonwriter wrote:
| Note that, though, the only reason this issue made the news
| is that corporations are _not_ actually free to assign
| locations to transactions without restriction, its just that
| the California sales and use tax system (like many other tax
| systems) accepts filings as true until and unless something
| raises a question (or a random audit occurs), and then
| audits, and then issues findings, and it has audited here and
| found that the rules were broken.
| jjtheblunt wrote:
| That's what i said, but better emphasis on the weird taxation
| rule allowing choice of point of online sale.
| matthewfcarlson wrote:
| I don't know about the largest example. Dell kicks back $30
| million a year to the city of Round Rock in sales taxes
| (https://roundrockchamber.org/city-of-round-rock-prepares-
| as-...). As someone who lives near there, I appreciate the
| city being well-funded but it does strike me as somewhat
| unfair and sort of wonder if the Washington approach makes
| more sense (though it's a headache to implement).
| dragonwriter wrote:
| > Dell kicks back $30 million a year to the city of Round
| Rock in sales taxes
|
| Cupertino is expected to lose $30 million _net_ revenue per
| year (not counting the 35% of the apple sales taxes that it
| kicks back to Apple) as a result of this deal being
| disallowed going forward.
| ghiculescu wrote:
| Cupertino forgot an important rule of business: never have all
| your revenue come from one customer.
| twelve40 wrote:
| Looking at the Vallco disaster there is certainly some room for
| improvement, but how many trillion dollar companies do you
| expect in a town of 58k people?
| astrodust wrote:
| Apple is not the only significant company in Cupertino.
| justizin wrote:
| okay then who else?
|
| when i last interviewed at apple, the office i interviewed in
| was so far from the spaceship, it was almost in another city.
| apple seems to be occupying just about every office park
| built since the 1970s in cupertino.
|
| also - those non-spaceship offices are _awful_ , unreachable
| by transit, no access to food without driving, basically an
| Office Space type environment. gross.
| [deleted]
| astrange wrote:
| Amazon, TrendMicro, Norton, Seagate, Panasonic used to be
| in Cupertino (just from names I remember on signs).
| HPE/Agilent still is.
|
| Of course they're unreachable by transit, that might cause
| crime! That'd never be acceptable to the average 800 year
| old Cupertino resident.
| Reason077 wrote:
| Sounds a bit like Japan's _Furusato Nozei_. This "hometown tax"
| allows taxpayers to choose where to send a portion of their tax
| payment, in order to benefit small regional towns that might
| otherwise be struggling with a shrinking tax base.
|
| In order to thank and attract people to pay their Furusato Nozei
| to a particular town, the towns provide gifts as kickbacks,
| competing with each other by offering the best gifts. Usually
| it's something associated with the local area to which the tax is
| paid. But in order to prevent the gifts from getting too out of
| control, by law the gifts are limited to 30% of the value of the
| tax paid...
| dragonwriter wrote:
| > Sounds a bit like Japan's _Furusato Nozei_. This "hometown
| tax" allows taxpayers to choose where to send a portion of
| their tax payment, in order to benefit small regional towns
| that might otherwise be struggling with a shrinking tax base.
|
| One somewhat significant difference is that the Apple/Cupertino
| thing is illegal, which is why it is being ended and getting
| news coverage.
| iamerroragent wrote:
| I am confused. Apple made an agreement with a City. Both
| parties seem to benefit from the arrangement. I am not sure I
| see anything illegal here.
|
| The Japanese "hometown tax" sounds rather intriguing though.
| I think it would be difficult to implement efficiently in the
| U.S. but I think it's a great idea none the less to help
| smaller towns with limited growth potential. Though I think
| work-from-home + cheaper cost of living will make small towns
| quite promising to live in today.
|
| Imagine being able to have small farm for the price of a
| house in the city + city income. Easily do a bit of farming
| in the morning, remote work during day, finish up anything
| else the farm needs for the day, and you're set for a pretty
| nice life in my opinion.
| dragonwriter wrote:
| > I am confused. Apple made an agreement with a City. Both
| parties seem to benefit from the arrangement. I am not sure
| I see anything illegal here.
|
| The illegal part is where the reporting of locations of
| transactions by Apple, for which they get kickbacks from
| Cupertino, violates California state law on how location of
| transactions subject to sales tax are reported by reporting
| them as occurring at Apple HQ rather than where the goods
| involved in the specific transaction are located at the
| time of the transaction.
|
| Alice and Bob making an agreement for Alice to forge
| documents so that Bob gets money that belongs to Clara and
| for which Bob provides a kickback to Alice may be a
| mutually beneficial agreement for Alice and Bob, but it is
| still illegal.
| iamerroragent wrote:
| > In California, the local portion of collected sales tax
| goes to the location where the transaction took place,
| not the location of the customer. The corporation can
| designate where a given transaction has taken place,
| separate and apart from the underlying origin and
| destination realities.
|
| I am sorry I'm just going of the linked article and I am
| sure I am missing some nuances here however it doesn't
| seem like what they've done is exactly illegal.
|
| Alice and Bob agreeing the forge a document is illegal.
|
| Bob agreeing to give Alice some money back that Bob
| collects from Alice's customers because otherwise Bob
| would get no money from Alice's customers doesn't appear
| to be illegal (yet). Of course Clara (the State) is free
| to change her positions on the matter.
|
| For example set a limit on how much a city can charge
| sales tax.
|
| > Tax Districts
|
| The statewide tax rate is 7.25%. In most areas of
| California, local jurisdictions have added district taxes
| that increase the tax owed by a seller. Those district
| tax rates range from 0.10% to 1.00%. Some areas may have
| more than one district tax in effect. Sellers are
| required to report and pay the applicable district taxes
| for their taxable sales and purchases.
|
| https://www.cdtfa.ca.gov/taxes-and-fees/sales-use-tax-
| rates....
| dragonwriter wrote:
| > I am sorry I'm just going of the linked article and I
| am sure I am missing some nuances here however it doesn't
| seem like what they've done is exactly illegal.
|
| When the linked article says they "The corporation can
| designate where a given transaction has taken place,
| separate and apart from the underlying origin and
| destination realities" it is correct only in the extent
| that, say, you _can_ report money you spent on narcotics
| and escort services as "charitable donations" on your
| federal tax returns, in that it is physically possible,
| but definitely not legal, to do it.
|
| The entire reason this is in the news is that state sales
| tax authorities audited Apple's sales tax reporting and
| found it out of line with the law.
| iamerroragent wrote:
| I am still not seeing anything here explaining the actual
| illegality here. As far as I can tell, and it appears
| still to to be determined, Apple and the city in question
| are both operating within the law.
|
| https://www.eastbaytimes.com/2023/04/13/apples-local-tax-
| arr...
|
| If anything it looks like the State is just now getting
| around to realizing that they foolishly left money on the
| table and now they want it.
|
| As it is we have Thursday it looks like to find out the
| results of the audit.
|
| Plus, bigger picture, what the city is being accused of
| doing to other cities, the the State's themselves already
| do to each other. Ask yourself why so many corporations
| are home in Delaware?
| dragonwriter wrote:
| > I am still not seeing anything here explaining the
| actual illegality here.
|
| The illegality is Apple assigning sales where the goods
| were not in Cupertino at the time of the transaction to
| Cupertino for sales tax purposes, to take maximize
| advantage of sales tax kickbacks offered by Cupertino,
| despite state law which says the location for sales tax
| is the location where the goods physically were at the
| time of the transaction.
|
| > If anything it looks like the State is just now getting
| around to realizing that they foolishly left money on the
| table and now they want it.
|
| The state gets the same share no matter where in the
| state the transaction is assigned for sales tax purposes.
| The entities losing out are other localities, not the
| State.
| iamerroragent wrote:
| > The illegality is Apple assigning sales where the goods
| were not in Cupertino at the time of the transaction to
| Cupertino for sales tax purposes, to take maximize
| advantage of sales tax kickbacks offered by Cupertino,
| despite state law which says the location for sales tax
| is the location where the goods physically were at the
| time of the transaction.
|
| This directly contradicts what the article states.
| dragonwriter wrote:
| > This directly contradicts what the article states.
|
| No, it doesn't.
|
| It contradicts what you appear to have falsely inferred
| from the very vague writing in the article, and that
| false inference may be the _intent_ of the vague writing,
| but it doesn't contradict what the article actually says.
|
| I have gone beyond the article to understand the actual
| facts here. For instance, here's the official _city_ page
| on the issue: https://www.cupertino.org/our-
| city/departments/finance/cdtfa...
|
| "In December 2021, the CDTFA notified the City that they
| were reviewing one of the taxpayers in the City. In May
| 2022, the CDTFA updated the City, saying they had asked
| the taxpayer for more tax returns. [...] In March, the
| CDTFA verbally informed the City of their preliminary
| determination that tax dollars had been misallocated to
| the City, and they gave rough estimates of how much money
| the City might lose. The CDTFA said the City would get a
| letter with the final results of the review, including
| the actual amount of money that would be lost, in the
| next four to six months."
|
| So that tells us the issue is about "misallocation". So,
| how are sales taxes _supposed_ to be allocated? Here's
| official information from the CDTFA, the agency
| responsible for sales and use taxes in California: https:
| //www.cdtfa.ca.gov/industry/localanddistricttaxes.htm#...
|
| "Regulation 1620, subdivision (a)(2)(A), states that
| participation in the transaction in any way by the in-
| state place of business is sufficient for the transaction
| to be subject to sales tax. However, to constitute
| participation, an activity must serve some real purpose
| and have some meaningful effect in the actual sales
| process and involve some genuine physical human
| interaction with the sale from that location.
|
| "Generally, activities taking place after the sale has
| occurred are not participation in the sale. There are
| also activities that a retailer might conduct from a
| California location to support its operations that do not
| constitute participation in the sale for purposes of
| Regulation 1620, subdivision (a)(2)(A), including price
| setting, purchase of resale inventory, web design, and
| general marketing.
|
| "Internet transactions are generally designed and
| intended to be processed online, without direct human
| intervention until the property is picked, packed, and
| shipped at the storage location. As such, a storage
| location is often the only place of business that
| participates in an Internet transaction. Activities
| related to creating and maintaining the automated online
| processes would generally be considered the type of
| support operations that do not constitute participation
| in any particular transaction. The location of the server
| where the website is hosted or maintained is also
| immaterial"
| [deleted]
| jefftk wrote:
| Patrick has a great piece on this
| https://www.kalzumeus.com/2018/10/19/japanese-hometown-tax/
| NovemberWhiskey wrote:
| California, which has no geographical nexus to internet sales
| other than being the locale in which Apple is located, is
| complaining about the sales tax being paid to Cupertino which is
| in exactly the same logical position?
| wrenky wrote:
| Not quite- Sales tax from sales by customers in California is
| being located to Cupertino. So if a customer in Fresno bought
| an iphone, that tax is allocated to Cupertino. Other states
| assess tax differently.
|
| After that fresno customer buys an iphone and pays the tax to
| Cupertino, Cupertino gives apple 35% of that tax back
| effectively lowering their sales tax rate.
| NovemberWhiskey wrote:
| I thought this worked like a stack? i.e. California gets x%,
| Santa Clara County gets y% and Cupertino gets z% ...
| dragonwriter wrote:
| > I thought this worked like a stack? i.e. California gets
| x%, Santa Clara County gets y% and Cupertino gets z% ...
|
| To the extent that is approximately correct, the issue here
| is that the Apple/Cupertino deal involves Apple apparently
| filing false paperwork to make Cupertino rather than the
| actual distribution site for the particular order the
| bottom of the stack, and is getting kickbacks from
| Cupertino out of the money effectively stolen from some
| other jurisdiction by that false reporting.
| khuey wrote:
| The question here is if the buyer is in Fresno and Apple's
| warehouse is in say Tracy then which counties and cities
| should be able to apply their sale taxes to the
| transaction.
| dhosek wrote:
| Yes, but not quite: This is actually about the California
| x%. When you pay sales tax, there is a
| state/county/municipal tax that gets paid to the state, the
| county and the municipality where the customer is located.
| Municipal or county taxes may be zero or even, in rare
| occasions negative.1
|
| Then, the state portion has a fraction that gets allocated
| to a municipality (thanks to Prop 13, a lot of local
| funding has been shifted to getting granted from the
| state), which is generally going to be the municipality
| where the business is located.
|
| These distinctions generally only come up for online
| transactions and some high-cost durable goods like
| automobiles (which is why there's no benefit to buying your
| car in a different county--you'll still pay the same tax).
|
| [?]
|
| 1. Thanks to a prop 13 lawsuit, for a time in the 90s, the
| county tax (or was it city? I don't remember now) for San
| Diego was actually -0.5% because it was judged that the
| county (city?) had illegally raised taxes and this was the
| method by which the judge determined that the taxes would
| be rebated.
| drewda wrote:
| It's not just Apple making this kind of deal with California
| cities regarding sales taxes from online sales within state:
|
| > Best Buy has been in Dinuba for 17 years, employing around 370
| workers, but seven years ago it became even more vital to this
| 25,000-population city. That's when the Dinuba facility was
| designated as Best Buy's sole point of e-commerce sales in
| California, meaning that any state resident making an online
| purchase would pay the local sales tax on their transaction to
| Dinuba, not the city where they live. That prompted Dinuba --
| facing a $1.9 million budget deficit -- to enter into a 40-year
| agreement to share those tax proceeds with Best Buy.
|
| > It's an arrangement that a handful of other cities have set up,
| including Cupertino with Apple Inc., Ontario with QVC Inc. and
| Nike Inc., Shafter with Williams-Sonoma Inc., San Bruno with
| Walmart Inc. Typically, cities commit to send half or more of the
| local sales tax paid on e-commerce sales in California right back
| to the companies, for decades, in the name of economic
| development.
|
| https://www.bloomberg.com/news/features/2023-02-23/e-commerc...
| AlbertCory wrote:
| I don't live _in_ Cupertino, but it 's right across the street
| (or several streets). I follow a lot of this on NextDoor.
|
| Cupertino isn't some random city; it's where Apple has been since
| the beginning. They contribute massively to the traffic around
| here, and they could easily afford to buy the empty Vallco site
| and build housing for their employees, who could then walk to the
| Spaceship. Only now are they even talking about building teacher
| housing there.
|
| Cupertino lets them get away with it because of all that money
| they're paying. I always thought a Chicago Move would be for the
| city to go to Tim Cook and say, looking around appreciatively at
| the Spaceship,
|
| "Nice building you have here, Tim. What was it, five billion?
| Very nice. Be a shame if we had to close it down for health
| inspections."
| funkyjazz wrote:
| "Ok say goodbye to $2B in annual tax revenue, we're moving to
| Redwood City!"
| AlbertCory wrote:
| An empty threat.
|
| Edited: what are they going to do, rent out the Spaceship for
| low-income housing? I don't think there's enough plumbing.
| favorited wrote:
| Less than 50% of Apple employees in the Bay Area work at
| Apple Park.
| AlbertCory wrote:
| how is that relevant to Cupertino?
| neximo64 wrote:
| They could move it.
| AlbertCory wrote:
| (picturing a trailer on 101 with a "Wide Load" sign on
| the back.)
| tonymillion wrote:
| You've seen Stargate Atlantis right? I imagine it'll be
| more like that...
| sharedbeans wrote:
| [flagged]
| kindatrue wrote:
| >they could easily afford to buy the empty Vallco site and
| build housing for their employees, who could then walk to the
| Spaceship
|
| You do know that the voters of Cupertino elected to their city
| council the person who posted on NextDoor that allowing Apple
| employees to live at Vallco would result in more high school
| prostitution right?
|
| https://twitter.com/HousingValley/status/1154781703262498816
| AlbertCory wrote:
| I thought you meant Steve Scharf for a second there.
| astrange wrote:
| Steve Scharf instead just said they should build a wall
| around Cupertino and make San Jose pay for it.
| AlbertCory wrote:
| He's actually someone I've known for a long time, so I
| was hugely amused to see him become a national figure (as
| it were).
| specialist wrote:
| Moral panic driven land use policy. Nice.
|
| _plus ca change, plus c 'est la meme chose_
| jrockway wrote:
| This is just a minor defect in democracy; representatives
| are chosen by people that already live there, so there is
| no strong electoral incentive to advocate for new
| residents. Sure, they will get more property tax revenue
| which pays for ... everything ... but, if you already have
| enough, you don't really want more. I don't think anyone in
| Cupertino is suffering from lack of government services, so
| there isn't a strong reason to vote in change.
|
| I think people are also irrationally afraid that building
| new housing will drive down the price of their existing
| housing, but do we really see that happen? (Why do real
| estate prices always go up? Because people will be stubborn
| and not sell their home for less than they paid, unless
| there is a Detroit-like crisis, which Cupertino is
| definitely not in danger of. At that point, things like the
| federal prime rate are really what put a damper on housing
| prices, not Apple employees moving into apartments built on
| a vacant lot.)
|
| To some extent, everyone is aware of these factors, which
| is why California said "enough is enough" and moved some
| control to the state level.
| Google234 wrote:
| No joke but I know of an Apple employee with a HS girlfriend
| (underaged). If you go to Berkeley CS you'd know.
| fundad wrote:
| I know Cupertino is upscale but residents still get in their
| cars and use the roads to get to work right? Not every resident
| is independently wealthy.
|
| Apple employees and contractors may contribute to the traffic
| by commuting from inside and outside of Cupertino to the office
| but does the company contribute "massively"?
|
| People also clog up the roads going to all manner of jobs and
| also coming to Cupertino for one of its many big box stores.
| astrange wrote:
| Cupertino doesn't have those stores anymore since Vallco
| closed.
|
| The city has been fighting Vallco redevelopment as hard and
| illegally as it can because the last thing they'll let Apple
| employees do is live in Cupertino. Only retirees and
| landlords allowed.
|
| (People on the planning commission have directly said Apple
| employees are too poor to be allowed to live there, are men
| so will molest their daughters and hire prostitutes -
| meanwhile the locals who show up to meethings think they're
| too rich so will park their BMWs in front of their houses and
| attract crime, and will give them cancer by planting 5G cell
| phone towers.)
| zen_1 wrote:
| Schrodinger's codemonkey
| AlbertCory wrote:
| > its many big box stores
|
| and you live where?
|
| I count two: Target and Home Depot.
| astrange wrote:
| There's a TJ Maxx.
| AlbertCory wrote:
| I call that a "store", not a "big box store."
| zamnos wrote:
| Home Depot (and Trader Joe's and H-Mart) are _just_ outside
| of Cupertino, in a trick that would otherwise look like
| gerrymandering since the border follows S De Anza Blvd and
| Prospect Rd to the south instead of jutting out to enclose
| those specific stores in San Jose 's jurisdiction. There
| is, however a number of popular stores, including Whole
| Foods, Target as you mentioned, a 99-Ranch and a Safeway,
| and a JOANN Fabric and Crafts. There's also Apple's
| Infinite loop campus which isn't a big box store but does
| involve a lot of traffic, as well as De Anza College, the
| local community college which also involves a lot of
| traffic. I swear there used to be a Best Buy on that
| stretch of Stevens Creek, but that was too long ago for my
| memory, and Google's memory.
|
| Complaining about people clogging up roads is some NextDoor
| level shit though.
| kccqzy wrote:
| You mean the Home Depot at 975 S De Anza Blvd, San Jose, CA
| 95129?
| CharlesW wrote:
| _" It isn't difficult to imagine these sorts of agreements giving
| rise to bidding wars between municipalities, each vying to offer
| the most generous kickbacks in exchange for a large corporation
| allocating its state sales to that locale."_
|
| Do we need to imagine? Hasn't this been common for decades?
| hedora wrote:
| In this case, we do need to imagine. It would be unreasonable
| to infer that there was such a bidding war, and the city with
| the company HQ in it happened to win.
| jrochkind1 wrote:
| "$107.7 million since 1998" --that's peanuts to Apple, right?
|
| It may be more to the state of California or local municipalities
| who would be getting the money (actually 107/35% == 305
| million... still over 25 years though!).
|
| But if Apple ends up getting dinged over this, they're really
| going to feel like they made a mistake, this was not much benefit
| to be worth even bad press.
|
| Maybe the Apple of 1998 was hungrier, and it just stayed there.
|
| Or are those numbers wrong? Does that number seem low for 35% of
| the entire CA sales tax owed by Apple over 25 years?
| causi wrote:
| I don't understand how sweetheart deals between cities or even
| states and companies are remotely legal under the Equal
| Protection Clause.
| brodouevencode wrote:
| A marketing piece for a flat tax.
| 35208654 wrote:
| >The agreement outlines that 35% of that local portion that is
| returned to Cupertino is handed by the city to Apple--to the tune
| of $107.7 million since 1998. California took notice and launched
| an audit.
|
| So $4m a year?
|
| >The Adopted Budget is budgeted at $130,587,325 and is funded by
| $130,244,157 in revenue.
|
| So taxpayers are "missing out" on 3% of their budget in exchange
| for 65% of 1% of Apple's online sales in California. How much
| does the city get in return for this deal? And, wouldn't Apple
| just choose somewhere else to direct the funds otherwise?
|
| Apple has to choose where to allocate the tax funds. That's the
| law. That Cupertino offered the best deal for them is a quirk of
| the law, not a shady deal by Apple. As well: their headquarters
| are located there. It's not like they shopped around for the best
| kickback deal by allocating it to some little town on the coast.
|
| > Cupertino is facing a 73% reduction in local tax revenue.
| California is taking issue with the agreement and examining the
| extent to which the California purchases attributed to Cupertino
| are proper.
|
| Err, what? There's some math here there doesn't add up. Did the
| article mean to say that Apple has contributed $107m _per year_
| since 1998 -- so $2.6b? If so, Cupertino is facing a _96%
| reduction_ not 73%.
|
| I must be missing something here. Could someone point me in the
| direction of the right math?
| kristjansson wrote:
| From the linked article[0] in the first paragraph:
|
| > Although Apple isn't named in the city staff report, the
| company is Cupertino's largest source of sales tax revenue.
| According to the audit, revenue will drop to $11.4 million in
| the current fiscal year from $42.1 million, and Cupertino may
| be required to return money to the state that it has received
| in previous years. The city may have to cut staff and other
| spending to cover the shortfall.
|
| So I think the 73% number reflects whatever chagnes CDFTA are
| enforcing to take some of the online sales tax revenue away
| from Cupertino. Also from that other article, the $107m number
| appears to reflect total payments from Cupertino to Apple since
| 1998
|
| > The company remits all sales tax it receives to the state tax
| department, which then allocates the local portion to
| Cupertino. The city passes on 35% of its total to Apple. Those
| payments to Apple have added up to $107.7 million since 1998,
| according to city payment records examined by Bloomberg Tax.
|
| But TFA is very unclear about the specifics of the state-city-
| company revenue sharing...
|
| [0]: https://news.bloomberglaw.com/daily-tax-report-
| state/apples-...
| Maxburn wrote:
| > And, wouldn't Apple just choose somewhere else to direct the
| funds otherwise?
|
| Ding! nailed it.
|
| These sweetheart deals exist because they know they are in
| competition with others and just want to capture a piece of it
| or risk losing it all.
| rootusrootus wrote:
| Then why didn't some little podunk town elsewhere in
| California work out a deal more lucrative to Apple than what
| Cupertino offered? Clearly this has a lot to do with Apple's
| HQ location. The actual money is just a pittance.
| dragonwriter wrote:
| > Did the article mean to say that Apple has contributed $107m
| per year since 1998
|
| No, Apple has _received_ $107 million rebated from Cupertino
| since 1998.
|
| Cupertino has retained (since the rebate is 35% of the total,
| so the total is 65/35 of the rebate) $198 million since 1998,
| and initially received $305 million.
|
| But while that is probably increasing over time, not sure where
| the 73% comes from, as that's ~$94 million/year.
|
| Hmm... More research:
|
| It's 73% of _sales tax_ revenue, not total city revenue.
| Cupertino currently gets $42.1 million per year in sales tax
| revenue, the deal going away is expected to drop it to $11.4
| million per year. (And there are expected to be fines and
| returns of past funds, on top of that.)
|
| https://appleinsider.com/articles/23/04/13/california-wants-...
| Rimintil wrote:
| > That Cupertino offered the best deal for them is a quirk of
| the law, not a shady deal by Apple
|
| These two things aren't incompatible with each other.
|
| > So $4m a year?
|
| A $2tn company shouldn't be concerned with losing out on $4m.
|
| No need to defend a $2tn company. It's okay to right-size this
| error.
| _s wrote:
| I may argue that the $2t became a $2t company because it
| cared about the 0.01% rounding errors it faced / faces in
| every part of it's operations.
|
| Where that lands ethically, morally or legally is up to
| interpretation by the relevant people and jurisdictions.
| [deleted]
| prepend wrote:
| What's the alternative? This seems like a non-issue as both Apple
| and Cupertino are just following the law as written.
|
| A better article would be "big companies bring in more sales tax
| to the cities where they are located" and that seems as expected.
|
| While imperfect, tax based on the location of purchase is most
| likely to be accurate. Would you tax where the person was
| physically located when they purchased, so vendors have to get
| customer geolocations at time of purchase? Where the data center
| is located so it depends what portion of the cloud was processing
| the db write? The residence of the customer so vendors have to
| know home address and non-california residents would pay no
| taxes?
|
| This seems like the author is finally growing up and learning
| that taxes exist. I remember a friend called me when they got
| their first paycheck and said something like "hey, there's like
| 45% missing" and they got to realize that taxes are substantial.
| Tiktaalik wrote:
| > What's the alternative?
|
| 100% of corporate revenue goes to the state and federal
| government. 0% to cities, and cities generate revenue to fund
| their budgets by levying property taxes on land owners.
| no_wizard wrote:
| Unless you live in Oregon, in multnomah county (Portland), in
| which case the city and county will tax your income too.
| rootusrootus wrote:
| 2.5% on taxable income above $125K (individual; $200K
| joint). Even software engineers, on average, will barely
| notice that.
| prepend wrote:
| I always think it's funny what people think other people
| will notice.
|
| Two professional software engineers, married and making
| $300k and raising 3 kids are extremely likely to notice
| an extra $2.5k in taxes.
|
| I remember making $25k and talking with my coworker
| making $60k saying how all their financial needs must be
| met because they make so much money.
|
| Perspectives vary, but beware thinking that no one cares
| about money.
| no_wizard wrote:
| Tax is a funny thing. I think I'd feel better if my taxes
| were actually visibly useful for the every day persons
| life. Like for Health care, for instance, or fixing the
| unhoused problems in the state, or maintaining the roads
| and sidewalks that seemingly _always_ have potholes in
| them, etc.
|
| I'd pay 10% _more_ if the quality of life perception was
| there, but it feels like all that goes to _nothing_
| no_wizard wrote:
| This is on top of Oregon's already large income tax. Just
| hop over 30 minutes to Vancouver and its all gone though,
| if you're lucky enough to WFH or can otherwise situate
| yourself there. Then you can double dip your tax savings
| by avoiding sales tax by crossing over the bridge to shop
| :)
|
| It's alot of tax. It was a shock to me when I moved here,
| though overall I don't regret.
| rootusrootus wrote:
| I've thought about it. Though you have to pay use tax,
| technically. I know many people just don't.
| no_wizard wrote:
| I have discussed it at length as well. I haven't visited
| Vancouver proper yet though, and now that I guess I'm
| used to being taxed like this i've adjusted myself
| accordingly.
|
| I'm honestly more worried about Oregon (and the Portland
| area specifically) becoming even _more_ regressive with
| taxation. I think I 'm kinda at my acceptable limit
| before I just move to Vancouver out of sheer protest.
|
| The amount of money we pay to the state is mind boggling,
| and yet you see lack of investment _everywhere_ you turn
| around. I was hoping, perhaps naively, that Portland
| would be like a better kept San Fransisco, but I was very
| wrong.
| rootusrootus wrote:
| Yeah Portland's government, especially in the relatively
| recent past, is far from inspiring. I'm at the outskirts
| of the metro area, so I don't have to live with their
| policy choices or pay their extra taxes, and I'm glad for
| it. I don't drive into downtown anymore now that we
| permanently closed the office there, and when I do drive
| down for some reason I'm shocked by how rough it has
| gotten in many places.
|
| Washington isn't out of the question, but I'll probably
| end up going farther. Like Colorado, perhaps. Staying in
| this area until my mom passes (sadly that will be within
| the next year or so), and then we're bailing.
|
| Since you mention regressive taxation -- I remember that
| a few years ago, I recall that Oregon was the least
| regressive state while Washington was the most (all
| states being regressive overall). I think the ranking
| changes a bit year-by-year so that may no longer be true.
| For a software developer, it's better to be in
| Washington. I'm pretty sure it was Tax Foundation that
| had that info. Right now they put the overall rate almost
| identical between Oregon and Washington, though that
| doesn't account for how it changes based on income.
| seanmcdirmid wrote:
| Technically you are supposed to report your purchases to
| Washington state and pay tax on them for things you buy
| in Oregon. Also, you are living in Vancouver, which isn't
| as cool as Portland.
| crazygringo wrote:
| > _Would you tax where the person was physically located when
| they purchased, so vendors have to get customer geolocations at
| time of purchase?_
|
| Huh? These are online purchases that have a delivery address
| for physical deliveries, and a billing address as well in case
| it's digital goods or services.
|
| Nobody needs to geolocate anything. And yes, most online sales
| tax across the country is precisely determined by the
| customer's address. California appears to be an exception here.
|
| There's nothing meaningfully less accurate about the customer's
| location. If anything, it's far _more_ meaningful and
| consistent, since I might make a purchase from a company based
| in Delaware, using their website hosted in Virginia, and half
| the order is shipped from a warehouse in Pennsylvania, while
| the other half is shipped from a warehouse in New Jersey.
| Consumers are much more "locatable" than corporations.
| ribosometronome wrote:
| >Huh? These are online purchases that have a delivery address
| for physical deliveries, and a billing address as well in
| case it's digital goods or services.
|
| Huh? So if I live and work in Buffalo and go into New York
| City to buy a sweater, the sales tax on my sweater goes to
| Buffalo? That's where it's going to be taken to and my
| billing address for the card I used to purchase the sweater.
| Or would the sales tax go to where the sale is made?
| crazygringo wrote:
| That's not an online purchase, that's a physical purchase.
| Those have always been taxed at the single location of the
| transaction, because buyer and seller are in the same
| place.
|
| My point was that there's nothing inaccurate about a
| delivery address or billing address. The parent was writing
| as if this were something confusing to determine.
| dragonwriter wrote:
| > This seems like a non-issue as both Apple and Cupertino are
| just following the law as written.
|
| If they were following the law as written, they probably
| wouldn't have been found out of compliance by a state audit
| based on compliance with the law as written.
|
| I mean, its not impossible, state auditors aren't infallible,
| but...
| crazygringo wrote:
| State officials disagree with each other all the time, they
| get corrected by courts all the time, etc.
|
| A state audit is always going to be heavily biased toward
| state interests as opposed to corporate or local interests.
|
| Laws aren't black and white and auditors make arbitary
| distinctions over gray areas all the time. Being found out of
| compliance by a state auditor isn't even remotely a sign that
| Apple and Cupertino weren't following the law -- especially
| when it's not like Apple cheaps out on its lawyers. It's
| simply that the auditor is challenging their interpretation
| of the law. Ultimately, a court would decide. And states lose
| in court _all the time_.
| dragonwriter wrote:
| > A state audit is always going to be heavily biased toward
| state interests
|
| The state gets the same share no matter where in the state
| the transaction is assigned.
|
| > Laws aren't black and white
|
| Some are quite black and white, some are less so.
| crazygringo wrote:
| The state is mainly composed of all the other
| municipalities that aren't Cupertino, and they're the
| ones losing out financially.
| TheTon wrote:
| In Washington state they solved this problem by allocating the
| sales tax to the location of the customer for online sales. I
| remember having to implement it as a small business and it was a
| minor pain, but I assume the legislators mostly had Amazon in
| mind when they passed the law.
| Hamuko wrote:
| I think this also happens with VAT in the EU. I pay the Finnish
| 24% VAT even if I order from Amazon.de (Germany has 19% VAT).
| Although as far as I understand, this does not apply to small
| online stores.
| shagie wrote:
| Before that was the case, sales tax only was to be collected if
| the company had a presence in that state. This was earlier in
| Amazon's history where they didn't have a warehouse everywhere
| and so many cases online sellers didn't collect sales tax.
|
| In the event that you buy something from somewhere else and no
| sales tax is collected, a "use tax" is to be collected... and
| most people weren't reporting this. For example
| https://www.revenue.wi.gov/Pages/FAQS/ise-usetax.aspx
|
| This hits states that have sales tax but no income tax hardest
| (Washington and Texas being the two that come to mind most
| readily).
|
| This changed in 2018 with South Dakota vs Wayfair -
| https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf
|
| https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.
|
| Amazon was initially opposed to this previously but as they
| grew it became apparent that they would have a presence in each
| state and so were for it... as it adds costs to all the small
| companies to _also_ properly collect sales tax for wherever
| they sell.
|
| From the Wiki article:
|
| > A year from the decision, nearly all states that collected
| sales tax had modified their laws to include interstate
| commerce taxes; however, in many of these states, the updated
| laws did not include any threshold limits on when such taxes
| can be collected. Small to medium businesses may find the cost
| of auditing their sales for each state to far outweigh the
| amount of tax actually owed and forgo the process; and
| similarly, states looking to collect these taxes may find the
| cost of prosecuting against the smaller business to outweigh
| the benefit. It is expected that a raft of lawsuits related to
| these new tax laws from South Dakota will occur from 2019
| through 2023.
| [deleted]
| TheTon wrote:
| My comment was in the context of sales within the state,
| where both the seller and buyer are in the same state (same
| situation as the article about Apple in CA). Previously, WA
| was like CA apparently is today, where the sales tax for in
| state online sales was determined by the location of the
| seller.
|
| You can see how it actually works here:
| https://dor.wa.gov/taxes-rates/retail-sales-tax/sales-and-
| us...
| samstave wrote:
| it took this many years for an article?
|
| Saratoga native... everyone knew this, that guy Jobs would buy a
| new car every six months just to avoid a DMV visit..
|
| You think that master of the masters of the con cant play a lowly
| municipality built on orchards into a tax haven?
| dragonwriter wrote:
| > it took this many years for an article?
|
| It took this many years for CDTFA audit to be started,
| completed, and the city to be told it needs to end the program,
| which is what the article is ultimately about.
|
| Given the _total_ amount identified and the per-year current
| amount, the amount seems likely to have been small potatoes for
| most of the life of the program. In 1998, a lot more of the
| business was brick and mortar, _and_ it was before even the
| iPod, much less the iPhone, was introduced.
| Hamuko wrote:
| Wasn't Jobs' Mercedes-Benz technically a lease? Because that
| probably made _slightly_ more financial sense than to outright
| buy one every 180 days.
| no_wizard wrote:
| When I learned about the Jobs' car deal, I asked someone I
| knew in car sales about it. They said that most likely its a
| mundane 6 month lease that they were likely just repeatedly
| auto-renewing against the same vehicle until he chose to
| drive a different one, if at all.
|
| This is the most probable scenario
| samstave wrote:
| Cool, so is that deal available to all?
|
| Imagine as a non-billionaire/famous asking for such terms
| at purchase.
|
| Ffs I was paying cash for a new car and they said they
| wanted to run my credit.. I said FU and had to threaten to
| leave if they wanted the sale, why run credit on a cash
| purchase?
|
| But I don't expect that most dealers will give you a jobs-
| like deal? Or is this normal?
| QuizzicalCarbon wrote:
| It's a short-term car lease. Nothing new.
| Kon-Peki wrote:
| > it took this many years for an article?
|
| It took this many years for an article to be interesting enough
| to HN to be submitted...
|
| Apple isn't the only company with this kind of deal, and
| California has been looking into them for years. For example,
| Williams-Sonoma is appealing a ruling against their deal with
| Shafter, also covered in Bloomberg Tax two years ago:
|
| https://news.bloombergtax.com/daily-tax-report-state/william...
| samstave wrote:
| interestingly enough, there are a few goog execs who landed
| at willaims-sonoma...
| hourago wrote:
| > Apple is receiving a kickback from the municipality for
| indicating that online sales to California residents are
| transacted in Cupertino. They're not bringing customers to
| Cupertino--not physically, at least--but merely are choosing that
| city as where sales are made.
|
| This is an openly illegal practice that is only possible by the
| collusion of judges. If judges accepted the totally fabricated
| reasons that companies provide for their behavior in murder
| cases, criminals could get out of prison by just arguing that
| "the victim shot himself from 10 meters away". You know that it
| is impossible, the judge knows that it is impossible, but as far
| as the judicial system accepts it then keeps you out of prison.
| That "sales" are all assigned to a very convenient city is the
| same case, an obvious lie that will not pass any accounting good
| practice but that tribunals accept to favor big corporations,
| usually for kickbacks.
| dragonwriter wrote:
| > This is an openly illegal practice that is only possible by
| the collusion of judges.
|
| No, its been possible because, like many taxing authority,
| California sales tax authorities accept the information
| provided by taxpayers initially, until they have reason not to
| (or the taxpayer gets selected for a random audit), and Apple
| wasn't audited on this until recently. Its in the news now
| because of that audit, in which this was identified as illegal.
| Up until now, no judges have been involved (and unless the
| audit findings are challenged, no judges will be involved), so
| the collusion of judges has not be important in allowing this.
| brookst wrote:
| > This is an openly illegal practice
|
| I'm really confused by this claim, even before all of the
| bizarre comparison to murder.
|
| Apple has to pick a city to allocate sales tax to. They are
| headquartered in Cupertino. And the "kickback" they receive is
| not in cash, but merely the ability to choose how some of that
| tax revenue is spent.
|
| I'm willing to believe it's bad policy and should be changed,
| but I'm at a loss for how you're seeing it as "openly illegal",
| let alone comparable to some homicide fantasy.
| dragonwriter wrote:
| > Apple has to pick a city to allocate sales tax to.
|
| No, they have to report the location of the transaction, for
| which there are legal rules, which specify that the location
| of the transaction for sales tax is "where the merchandise is
| physically located at the time the sale takes place." [0]
|
| Apple chose, instead of following the law, to report the
| transactions as taking place in Cupertino irrespective of
| where the actual merchandise sold in the particular
| transaction was located. And received a kickback from
| Cupertino for doing it.
|
| The reason this is in the news is because California's sales
| tax authority conducted an audit of Apple's sales taxes, and
| notified Cupertino that they are about to lose a whole lot of
| ongoing revenue _and_ must pay a bunch back because of the
| illegal allocation.
|
| [0] https://www.cdtfa.ca.gov/formspubs/pub109/
| [deleted]
| plasticsoprano wrote:
| "No, they have to report the location of the transaction,
| for which there are legal rules, which specify that the
| location of the transaction for sales tax is "where the
| merchandise is physically located at the time the sale
| takes place.""
|
| And if the merchandise is located in China at the time the
| sale takes place? What city do they pick then?
| dragonwriter wrote:
| > And if the merchandise is located in China at the time
| the sale takes place?
|
| Then the consumer owes use tax and the seller doesn't owe
| sales tax, because its a sale from outside of California.
| This is also specified in the state tax information
| document posted upthread.
|
| But Apple isn't paying sales taxes in Cupertino for sales
| it isn't required to pay any sales tax on in the first
| place. For the most part they deliver from their many
| California warehouses (and even retail stores), not
| China, for in-state orders.
| sharedbeans wrote:
| Do you think California would accept a company like Apple
| not collecting the sales tax because the merchandise came
| from China? Any company doing online sales would just
| need to locate the merchandise across state lines.
| dragonwriter wrote:
| > Do you think California would accept a company like
| Apple not collecting the sales tax because the
| merchandise came from China?
|
| California sales tax collecting authority spells out in
| black and white that they are not to collect sales tax in
| that case, so I'm going to say "Yes". (OTOH, they do have
| to collect the equivalent use tax, based on the location
| where the goods are _delivered_ if they are, because of
| their other business circumstances - as Apple is -
| required to register with CDTFA and collect and remit use
| tax on behalf of customers. But, again, that's both
| technically separate from _sales_ tax and, more to the
| point, has a very specifically specified location which,
| again, Apple would not be legally free just to move to
| their HQ or some other location.)
| jll29 wrote:
| Apple uses another legal entity, Cork, Ireland-based
| Apple Sales International (ASI) that asks Foxconn to
| produce a purchased device and to ship it directly to the
| country where it was ordered. This is part of a game
| called "transfer pricing", an OECD-approved legal
| procedure for multinational corporations to lower their
| overall average effective tax rate by creating a trans-
| jurisdiction network of company entities with
| patent/trademark cross-licensing contracts:
|
| https://taxjustice.net/faq/what-is-transfer-
| pricing/#:~:text....
|
| https://curia.europa.eu/juris/document/document.jsf?text=
| &do...
|
| https://en.wikipedia.org/wiki/Apple%27s_EU_tax_dispute
|
| https://scholar.google.de/scholar?as_ylo=2019&q=oecd+tran
| sfe...
|
| It is not just Apple. For example, this permits SIEMENS
| AG to claim they are headquartered in the low-tax village
| of Zug, Switzerland for tax purposes, despite the
| company's Web pages state the giant has its HQ in
| Neuperlach Sued, part of Munich, Germany. Governments
| lose billions in taxes every year from transfer pricing.
| sharedbeans wrote:
| Ok I think I see that they would be required to collect
| use tax in this case, it would not be the customer
| remitting it.
| YawningAngel wrote:
| Apple is headquartered in Cupertino, where would you have them
| allocate their sales if not there?
| superturkey650 wrote:
| I'd assume the same way they determine the state to apply
| sales tax for, by the customer and not the company.
| schoubey wrote:
| The place where the customer placed the online order from.
| dragonwriter wrote:
| Well, the _law_ would have them allocate their sales tax for
| each transaction to the location "where the merchandise is
| physically located at the time the sale takes place." [0]
|
| That's why Cupertino is losing the revenue: CDTFA audit
| Apple, and found they were misallocating transactions. The
| news is juicier, because they were getting kickbacks from the
| city of Cupertino for doing so, but if it were _legal_ it
| wouldn't even be in the news right now, the news came out of
| the arrangement _being identified as illegal_ , not out of it
| existing.
|
| [0] https://www.cdtfa.ca.gov/formspubs/pub109/
| seanmcdirmid wrote:
| > A sale occurs in the state where the merchandise is
| physically located at the time the sale takes place.
|
| So in China? This is confusing. Its not like Apple is
| warehousing iphones somewhere waiting to be sold.
| dragonwriter wrote:
| > Its not like Apple is warehousing iphones somewhere
| waiting to be sold.
|
| Apple in fact has multiple fulfillment warehouses in
| California and also about two years ago started using its
| retail stores as part of its fulfillment system for
| online orders.
|
| Delivery times from China suck. (If it was selling goods
| from China, it would be required to collect and remit use
| tax on behalf of California customers rather than paying
| sales tax, and that's based on customer location, still
| not HQ or "wherever Apple gets the biggest kickback".)
| boredumb wrote:
| In the age of internet sales it goes from 'just tax the receiving
| locale (POS?)' or 'just tax the company locale' to dealing with
| multiple entities (headquarters, warehousing, staffing,
| customers) all in different locations co-mingled across different
| state jurisdictions. Sales tax is also awfully regressive.
| didip wrote:
| Why sales tax is regressive? I keep hearing this but I don't
| understand why it is regressive.
| kccqzy wrote:
| Why don't you read the article which contains an explanation
| of why sales tax is regressive.
|
| > Sales tax is already notoriously regressive--that is, it
| places a larger burden on low-income taxpayers. There are no
| brackets or marginal rates in sales tax. Whether you make
| $100 or $100 million, your sales tax in Cupertino is 9.125%
| of the taxable purchase. The result is the portion of
| individual income that goes to paying sales tax is invariably
| higher in lower income individuals than it is in higher
| income folks.
| HWR_14 wrote:
| So, in the tax system, the terms describe percentages of
| income/assets taken from the taxes. Progressive taxes charge
| a higher percentage from richer people than poorer people.
| Flat taxes aim to take the same percentage from everyone.
| Regressive taxes charge poorer people a higher percentage of
| their income.
|
| People say sales taxes are regressive because the cost of
| things that people buy usually increases slower than the
| income to support it. Very poor people spend (over) 100% of
| their income. Richer people do not - they save for retirement
| and other things. And if they want to buy toys, they might be
| very expensive toys (eg a yacht). It is worth going to a
| place without the sales tax to make a large purchase.
| dragonwriter wrote:
| > Why sales tax is regressive?
|
| Because it consumes a greater marginal share of income at
| lower income levels, which is the definition of a regressive
| tax.
| [deleted]
| crazygringo wrote:
| > _In California, the local portion of collected sales tax goes
| to the location where the transaction took place, not the
| location of the customer._
|
| Well that's clearly the root of the issue here.
|
| Why?
|
| Generally, across the country, for online purchases you pay sales
| tax for whatever the delivery address is.
|
| Seems rather bizarre that California allocates the local portion
| of sales tax of online sales to the business location rather than
| customer location, no?
| ac29 wrote:
| I work for a small business in California that ships all our
| products (no retail) and we are definitely required to charge
| sales tax based on the location of the customer, not our
| business.
| skybrian wrote:
| Is that state or local sales tax?
| dragonwriter wrote:
| Most online sources say the rule in California is to use the
| ship-from (not HQ) address for city, county, and state sales
| tax and the ship-to address for special district taxes; so if
| those sources are correct, this is just Apple misusing the HQ
| address as if it were the ship-from address for tax purposes to
| steal taxes from elsewhere for Cupertino in exchange for a
| kickback from Cupertino.
|
| Given that, insofar as there is a local infrastructure cost
| imposed by supporting the capacity for the transaction to occur
| it occurs predominantly a the ship-from address, paying city,
| county, and the locally-redirected portion of state sales taxes
| there makes some sense.
| Synaesthesia wrote:
| Vert well written article explaining how this benefits the
| richest company in the world and is bad for ordinary citizens.
| The sort of thing we should try and change, but is endemic.
___________________________________________________________________
(page generated 2023-04-18 23:01 UTC)