Cupertino settles with Apple, pays $12.1M over tax dispute

Cupertino concluded a sales tax dispute with Apple (NASDAQ:AAPL), agreeing to pay the tech giant $12.1 million. This settlement, confirmed by the City Council and completed in March 2025, puts an end to a contentious issue that has its roots in a 1998 agreement.

Under the terms of the longstanding arrangement, Apple allocated all of its online sales in California to Cupertino, which in turn, enabled the city to receive a share of the sales tax. This agreement became a point of contention as Apple’s digital sales volumes increased, attracting scrutiny from other cities and state tax authorities.

A pivotal audit carried out by the California Department of Tax and Fee Administration in 2023 determined that sales tax should be apportioned based on the delivery location of purchases rather than the company’s headquarters. Originally, Cupertino was anticipated to reimburse Apple $56.5 million. However, a settlement reached in 2024 allowed Cupertino to keep $74.5 million and issue the refund to Apple from its general fund.

The longstanding tax arrangement had been a significant source of funding for city services. However, the recent resolution has prompted a reevaluation of tax incentives and their impact on local governments, especially those with large corporate residents. State officials are now scrutinizing such tax benefits that seem to favor specific cities.

While the refund to Apple is relatively minor in the context of the company’s vast business operations, this case underscores the evolving nature of tax policies in the digital age. For Cupertino, the settlement marks a resolution of the immediate dispute, but it also signals potential changes in the city’s financial strategy in the years ahead.

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