Tesla Is Dodging Apple’s 30% App Store Tax

Tesla Is Dodging Apple’s 30% App Store Tax

A hand touching the Tesla app on an iPhone

Apple has a controversial policy in its App Store, one that’s drawn the ire of Elon Musk in the past. If you want to charge people to unlock a feature in your app, you need to use Apple’s “In-App Purchase” system. That routes the transaction through Apple’s payment network, and the $3-trillion tech giant takes a 30% cut of the proceeds. Musk famously described the fee as a “30% tax on the Internet.” At one of his companies, though, he’s not paying it. Tesla is dodging Apple’s In-App Purchase rules with one of its features, “View Live Camera.” Inexplicably, Apple seems to be allowing Tesla to get away with it.

Tesla offers drivers a tier of premium features called “Connectivity Packages” that costs $9.99 a month. The package unlocks a number of functions and perks including a satellite view map in the car’s console, a web browser for your car’s dashboard, and several others. Normally, this feature falls under an exception to Apple’s policy. Apple only makes developers use the In-App Purchase system for features that users “consume” within an app on the iPhone itself, but the company doesn’t charge for features used on other hardware. For example, you use Tesla’s web browser in your car, so the company can use any payment system it wants to unlock the feature. But the View Live Camera connectivity feature only works in conjunction with the Tesla app. Per Apple’s policies, Tesla would need to offer the iPhone’s In-App Purchase tool for payments. In reality, though, you can only pay with a credit card, per Gizmodo’s tests.

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That means Tesla is dodging Apple’s App Store tax, skipping out on what likely adds up to millions of dollars that Apple could be collecting as years go by. For some reason, Apple seems fine with this. Neither Apple nor Tesla responded to requests for comment.

Musk tweeted and then deleted a meme saying he would “go to war” before paying Apple’s tax.

Musk tweeted and then deleted a meme saying he would “go to war” before paying Apple’s tax.

View Live Camera works as the name implies. Drivers who pay for the Connectivity Packages can use the feature to watch a live feed on the Tesla app streamed from their car’s built-in cameras. The same feature lets you speak into the Tesla app and remotely broadcast your voice from the car’s loudspeaker.

Apple’s App Store guidelines for the In-App Purchase system specifically address this kind of scenario. Apple’s “Hardware-Specific Content” policy says, “App features that work in combination with an approved physical product (such as a toy) on an optional basis may unlock functionality without using in-app purchase, provided that an in-app purchase option is available as well.”

But again, the Tesla app does not offer In-App Purchase as a payment option. You can also use a credit card linked to Apple Pay for Tesla’s Connectivity features, but that’s still different from the In-App Purchase system. Apple doesn’t charge the 30% fee for Apple Pay.

Apple runs apps through a rigorous and unforgiving review process every time developers issue an update. Just recently, Apple kicked a cryptocurrency-focused social network called Damus out of the App Store because it let users send each other “tips” using Bitcoin. In Tesla’s case, however, Apple seems to be letting the company break the rules.

The guidelines for Hardware-Specific Content are more lenient than Apple’s payment policies for other kinds of app features. In most cases, apps are forbidden from collecting payments any other way than the iPhone’s In-App Purchase system. In fact, Apple’s policy says apps can’t even mention that users can use another form of payment if you go through a web browser instead of paying through the app, an issue at the center of an ongoing legal battle.

This causes problems for consumers. For example, it’s impossible to sign up for a new subscription on Netflix or Spotify using iPhone apps because the companies don’t want to charge customers an extra 30% to cover the Apple tax. The Netflix and Spotify websites explain that you need to sign up with a web browser, but the apps aren’t allowed to give out advice to confused users. The Kindle and Audible apps are in similar situations.

A Musk tweet reading "Did you know Apple puts a secret 30%  tax on everything you buy through their App Store?"

A Musk tweet reading “Did you know Apple puts a secret 30% tax on everything you buy through their App Store?”

Apple is in the middle of a years-long lawsuit with Epic Games, maker of Fortnite, over this very problem. Apple banned Fortnite from the App Store because it provided a link that let users pay for in-game “V Bucks” through a web browser, where they were 30% cheaper than they cost in the app. A federal court ruled that Apple is allowed to take the 30% cut, but can’t block developers from pointing users to alternative payment options. Apple appealed the ruling to the Supreme Court in early July. In Europe, the Digital Markets Act will soon force Apple to let other app stores onto the iPhone next year, but there’s no movement in that direction in the US so far.

Elon Musk has made loud complaints about Apple’s payment policy. He brought up the issue in a tirade against the fruit stand last year. Musk tweeted to his millions of followers, “Did you know Apple puts a secret 30% tax on everything you buy through their App Store?” In another tweet that he later deleted, Musk said he would be “Going to war” with the iPhone king rather than paying the fee.

But after a multi-day tantrum, Musk’s war never came. Apple CEO Tim Cook invited Musk to a meeting at the company’s offices on November 30th, 2022. Whatever they discussed, it turned Musk from a threat to a lapdog. Not only did he stop criticizing Apple, Musk started praising the company. Musk tweeted a video of a lake at Apple’s campus, thanking Cook “for taking me around Apple’s beautiful HQ.” Gizmodo asked Apple and Tesla if the two CEOs discussed enforcement of the In-App Purchases policy at Tesla or any of Musk’s other companies. Apple and Tesla did not respond.

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