Library and California Department of Revenue reach settlement over retroactive Apple online sales tax
During a recent interview, Cupertino City Manager Pamela Wu shared her insights on how the city managed a challenging situation that arose from the COVID-19 pandemic. As consumer habits shifted from in-store shopping to online purchases, Cupertino experienced an unexpected increase in online sales tax revenue, a shift that hadn’t been anticipated when the city entered into its revenue-sharing agreement with Apple.
In 2023, the California Department of Tax and Fee Administration conducted an audit of the online sales tax collected from Apple’s headquarters in Cupertino. This audit resulted in a mandate for the city to remit online sales tax back to the state, retroactively starting from April 2021, which imposed a significant repayment burden on Cupertino.
On October 3, the Cupertino government announced it had reached a settlement with the state, allowing the city to retain millions in future online sales tax revenue and avoiding the need to refund previously collected taxes.
“We had to make difficult cuts and reductions,” Wu stated. “This was a major task for our entire team, but we remained committed to achieving a balanced budget.” She highlighted the collaborative nature of maintaining fiscal balance, stressing the trust the city council placed in city staff.
Wu also discussed her determination during the negotiation process, recalling her routine trips to Sacramento. “I was making the journey three times a week, starting my day at 5 AM to meet with anyone who could help. I did it for the city,” she said, underlining her dedication to engaging with state legislators to ensure the city’s interests were represented.
The settlement with California tax authorities not only secured future sales tax revenue for Cupertino but also spared the city from a lengthy and costly legal dispute, which was a significant win for the city’s budget.
Mayor Sheila Mohan reflected on the two-year negotiation process, calling it a tremendous challenge. “We know that financial hurdles still lie ahead,” she noted, acknowledging a projected decrease in revenue but expressing optimism about moving forward on a more stable foundation without the worry of potential tax refunds from past years.
Mohan attributed the successful resolution to the collective efforts of city staff, legal advisors, and council members. “It’s truly the best outcome that everyone hoped for,” she concluded.
