Apple to Receive Less Sales Tax Rebate for Cupertino’s Support of Apple Campus 2

On November 11th, 2013, the City of Cupertino extended a sales tax rebate agreement with Baz Industries, Inc., a consulting company representing Apple. Anticipating that Apple’s proposed second campus may significantly impact the local traffic and impose a greater challenge for Cupertino to provide adequate public services, the extended agreement reduced the sales tax rebate rate from 50% of sales tax increment generated by Apple product sales to 35%.

Cupertino and Apple first entered into a sales tax rebate agreement in 1997. Because local governments in California receive 1% of local sales taxes for all sales occurred in their jurisdiction, incremental sales taxes are used as an economic development tool.  To foster economic development and incentivize more sales taxes, Cupertino agreed to reimburse approximately 50% of the local sales tax increment generated by Apple. In return, Apple agreed to designate Cupertino as its point of sales for a portion of its online sales. Such a sales arrangement enabled Cupertino to receive more local sales taxes. The incremental sales taxes were calculated as the difference between the total amount of Apple’s products related sales taxes Cupertino received and the portion of sales taxes attributable to sales occurred at the Apple store located in Cupertino R&D campus.

The agreement has been extended for several times since 1997 and brought mutual benefits to Apple and Cupertino. In 2012 alone, Apple reported approximately $1.3 billion taxable sales occurred in Cupertino with a majority attributable to its online sales of Apple’s products. Based on the 1% local sales tax rate and the 50% rebate rate, it is estimated that Apple received over $6 million from Cupertino as sales tax incentives and Cupertino also strengthened its tax base by over $6 million in sales taxes.

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