Yes actually it isn't illegal to make mistakes on filing your taxes. That's why you can amend them.

Deliberately avoiding paying tax is illegal. Apple didn't avoid paying tax. They just reported where the local tax should go incorrectly.

The State then took Apples word and gave too much to the city.

State inefficiency allows this. If existing laws haven't been changed to effect this thenthe State was negligent in failing to audit shit for decades.