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Not Just Apple, How Microsoft Sidestepped Billions In State Taxes 595

reifman writes "Apple's not the only company to save billions in taxes through Nevada as The New York Times reported yesterday. Here's how Microsoft's saved $4.37 billion in tax payments to Washington State and how it's led indirectly to $4 billion in K-12 and Higher Education cuts since 2008. 18% of University of Washington freshman are now foreigners (because they pay more) up from 2% six years ago. Washington State ranks 47th nationally in 18-24 yo college enrollment and 48th in K-12 class size. This hasn't stopped the architect of the company's Nevada tax dodge from writing in The Seattle Times: 'it's [Washington] state's paramount duty to provide for the public education of all children. Unfortunately, steady declines in public resources now threaten our ability to live up to that commitment.' Yes, indeed."
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Not Just Apple, How Microsoft Sidestepped Billions In State Taxes

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  • what about slashdot? (Score:5, Interesting)

    by larry bagina ( 561269 ) on Sunday April 29, 2012 @06:05PM (#39840109) Journal
    Does geeknet, Inc. pay accountants to minimize their tax burden?
    • by damn_registrars ( 1103043 ) <damn.registrars@gmail.com> on Sunday April 29, 2012 @06:37PM (#39840351) Homepage Journal

      Does geeknet, Inc. pay accountants to minimize their tax burden?

      Are you assuming slashdot still brings in enough traffic to make money?

      • by rainmouse ( 1784278 ) on Sunday April 29, 2012 @08:03PM (#39840881)

        Are you assuming slashdot still brings in enough traffic to make money?

        Instead of attempting to name and shame companies, perhaps instead we should try to find a mega-corp that actually does fairly and honestly pay its full tax bill. How about a bit of positive reporting?

        • by twotailakitsune ( 1229480 ) on Sunday April 29, 2012 @09:07PM (#39841227)
          If the corps paying fairly get named, than there share holders could sue for not doing their jobs.
        • by Ihmhi ( 1206036 ) <i_have_mental_health_issues@yahoo.com> on Sunday April 29, 2012 @09:46PM (#39841437)

          Instead of attempting to name and shame companies, perhaps instead we should try to find a mega-corp that actually does fairly and honestly pay its full tax bill. How about a bit of positive reporting?

          My only guess at such a company would be Chik-Fil-A since they close on Sundays despite the obviously lost business. I have a difficult time thinking of any other companies that would lose money solely on moral grounds like that.

          To be honest I'm not entirely sure if "mega-corp" and "plays by the rules" would ever go hand-in-hand, now would they? If you read anything about nearly any big company you hear about how they got their hands dirty squashing the competition and skirting every rule they can. Look at Microsoft with their EEE philosophy.

          • My only guess at such a company would be Chik-Fil-A since they close on Sundays despite the obviously lost business.

            B&H photo/video [bhphotovideo.com] does the same. Last I checked, even their website was closed for sales on the sabbath.

            • by b4dc0d3r ( 1268512 ) on Monday April 30, 2012 @12:52AM (#39842307)

              I hate to nitpick, but that's not the Sabbath. Jews think it's Saturday, Christians think it's Sunday. That doesn't mean one or the other is right, and for the non-Christian, non-Jew audience, you might clarify.

              They are closed on the Jewish Sabbath, actually Shabbat, which is a specific day, not the Sabbath which is dependent on religious affiliation.

              The history of who decided when it is, is kinda important for when you are describing it. Chick-fil-A is closed on one Sabbath, B&H is closed on the other. It helps to specify when there is disagreement, in this case, I would not even use "Sabbath" generically, I would specify which religion. Or if discussing Judaism, Shabbat might be better since that's the way I have read it. Plus you score Lebowski fan points.

        • by JWSmythe ( 446288 ) <jwsmythe@noSPam.jwsmythe.com> on Monday April 30, 2012 @04:02AM (#39842917) Homepage Journal

              They all pay their taxes honestly. The problem is, they're exploiting holes in tax law to minimize their tax burden. Everyone does this. Even your average Joe citizen. They file their taxes with as many exemptions as possible, to minimize what they have to pay.

              The larger the company, the more ways they have to get around it. Look at GE [businessinsider.com].

              I'm sure most of us have heard of tax shelters, offshore accounts, blah, blah, blah.. There are a plethora of ways to hide income, or minimize its impact on you.

              I, JWSmythe, could open JWSmythe Consulting in any of a number of countries. Payments to "me" could go to these offshore companies with no tax burden in the US. When tax time comes around, *I*, the citizen of the US, never earned a penny here. I did enjoy the comforts of an off shore company paying my mortgage, utilities, and whatever other expenses I had.

              It doesn't work quite that smoothly. Making no money can raise red flags. So I would be paid a low salary, but I still wouldn't need to worry about pesky things like bills.

              For the record, I do not operate this way. It's usually people and companies that make at least $500k/yr that benefit from it. For what I make, it it would cost me more to set up the offshore company than I pay in taxes. I report everything honestly. I pay my taxes appropriate for where I actually live. If I were to cheat the system in any sort of way, I'd get treated like a criminal, and suffer from tax liens, payroll deduction, and bank account seizures. Us citizens have to worry about such things. Big companies rarely do. At worst, they can negotiate their way around such problems.

              In the case of the Apple and Microsoft stories, they used domestic tax havens to avoid paying state taxes. I'm sure they also used quite a few international ones for various dealings. Many companies also frequently get tax incentives for operating in a particular city. I've seen many companies come and go, where a local government will offer them a period of no taxes, or even negative taxes (us taxpayers pay them). When the term of that agreement expires, and the local government expects to start getting a return on their investment, the company moves that office to somewhere else willing to make a sweet offer. It's good for the company. It's not so good for the people who were working in that location, when they find that their job has been moved or downsized.

              IMHO, no company should get special treatment. Taxes work because everyone pays equally. In reality, the lower classes cover the tax burden, while the large corporations enjoy benefits.

              I didn't read too far into the MS and Apple situation. It seems there is a royalty tax, which may have been imposed by the state as an attempt to profit from a small high income segment of the state's industry. That's speculation though, I didn't research that at all.

          • In reality, the lower classes cover the tax burden, while the large corporations enjoy benefits.

            That's an interesting angle on things:

            http://online.wsj.com/article/SB10001424052748703703304576299560728821804.html [wsj.com]

            C//

            • by mcgrew ( 92797 ) *

              The rich pay more in total dollars, but far less as a percentage of income. They have more deductions possible, those earning capital gains pay half the rate of the middle class, and their SS and Medicare taxes are a far lower percentage of their income since those are capped at a given amount.

              There's no excuse for Warren Buffet to pay a lower percentage of his income in taxes than me. None whatever. It's just wrong.

    • by Fluffeh ( 1273756 ) on Sunday April 29, 2012 @06:43PM (#39840395)

      I think everyone tries to minimize their tax burden. What makes these companies stand out is the vast extent of effort they put into it.

      I earn an above average salary and I pay my accountant to do my taxes to ensure that I am able to claim all the deductions that I am entitled to. The difference is that I don't have a shell company set up in a tax haven paying me in some nefarious manner that is done to avoid yet another fee of some sort. These stories wouldn't be stories if MS or Apple simply claimed all that they could on their tax statements, they are stories because of the absurd lengths that they go to. I am absolutely sure that /. and many websites try to claim all that they are entitled to, but I would be exceptionally surprised if the lengths that they went to included offshore tax havens, "Offices" set up in a state to claim a different regional address and the like.

      • by Swampash ( 1131503 ) on Sunday April 29, 2012 @07:08PM (#39840563)

        I think everyone tries to minimize their tax burden. What makes these companies stand out is the vast extent of effort they put into it.

        I earn an above average salary and I pay my accountant to do my taxes to ensure that I am able to claim all the deductions that I am entitled to. The difference is that I don't have a shell company set up in a tax haven paying me in some nefarious manner that is done to avoid yet another fee of some sort. These stories wouldn't be stories if MS or Apple simply claimed all that they could on their tax statements, they are stories because of the absurd lengths that they go to. I am absolutely sure that /. and many websites try to claim all that they are entitled to, but I would be exceptionally surprised if the lengths that they went to included offshore tax havens, "Offices" set up in a state to claim a different regional address and the like.

        Summary: when you do it that's OK, but when someone else does it, that's bad.

        • Since I really don't have a leg to stand on so I'll try to compare apples and oranges and hope that my shameless whoring for the wealthy will eventually tinkle down upon myself.
        • by SydShamino ( 547793 ) on Sunday April 29, 2012 @08:28PM (#39840991)

          Even Warren Buffet claims all the deductions and tax breaks he can, all while pointing out that he could and should pay more. If he, or I, or Fluffeh just gave money to the federal government, it would have no measurable effect on the overall deficit or direction of government spending. If, on the other hand, everyone who could pay more did, we could minimize the deficit when times are bad, pull into a profit when times are good, and try to get on a plan to pay down the debt.

          Voluntary extra payments just let people with empathy and benevolence cover for people with neither. We don't want to enable those people to live a life of selfishness. We want to force them to comply with the will of the majority. And frankly, most of the laws of society exists to force people who lack empathy and benevolence to comply under penalty of imprisonment. Exactly what should be forced and what shouldn't is the matter for strong, healthy political debate. But anyone who argues that no one should be forced to pretend to have empathy or to do anything that benefits society likely lacks empathy and benevolence, and serves to prove why we need laws to force compliance.

          • by Grishnakh ( 216268 ) on Sunday April 29, 2012 @09:12PM (#39841255)

            Voluntary extra payments just let people with empathy and benevolence cover for people with neither.

            Actually, no. Voluntary extra payments to the federal government allow it to continue to murder people overseas and give unearned money to sociopathic corporations who then give a little bit back to politicians in the form of bribes^Hcampaign contributions. In my book, it's ethical to withhold as much money from the federal government as possible, although obviously it's a lot safer if you find legal methods of doing so.

            Withholding money from state governments, on the other hand, seems a little worse to me. State governments aren't engaged in illegal wars of aggression overseas (nor do their budgets pay for that; that comes entirely from 1) federal income tax payments and 2) the Fed printing money and 3) borrowing from other countries), and that's generally where the funding for social programs comes from these days. It's certainly where the money for pre-college education comes from, so a company chiding the state government for not spending enough on education, and then that company dodging taxes as much as possible with loopholes and foreign "offices" is the height of hypocrisy.

      • State and local governments are responsible for the actions of Microsoft and Apple because they passed the laws making such tax avoidance possible. It's unreasonable to think that any company or individual would not try to pay the lowest legal amount.

        But the lengths to which Apple, Microsoft, and the other tech giants have gone to influence these laws is what offends me. The tech lobby's biggest priority is to allow high-tech firms to bring back profits from overseas operations that were established precise

  • I live in Seattle. (Score:5, Interesting)

    by khasim ( 1285 ) <brandioch.conner@gmail.com> on Sunday April 29, 2012 @06:07PM (#39840121)

    While I oppose the kind of tax dodges that Apple and Microsoft are up to ... I cannot say that any of the problems in this state would be that much better if Microsoft paid all the taxes possible here.

    Our local government seems amazingly incompetent.

    • by gstrickler ( 920733 ) on Sunday April 29, 2012 @07:05PM (#39840545)

      Which is precisely the reason individuals and companies should take all the deductions they can, and keep that money out of the hands of politicians.

      We need government, and government needs taxes to operate. But the legitimate purpose of government is national defense, implementing a legal/court system, promoting the welfare of the people (actual people, not corporations), promoting the development of infrastructure and standards, and protecting the resources and environment. When you give them more money, they just find more ways to spend it, usually wastefully or for the benefit of a few friends/donors.

    • Our local government seems amazingly incompetent.

      Our government is fine. It's the voters who are incompetent. We'll vote for something 10 times and then decide 2 years later right before construction that we don't want it... then spend another 10 years trying to decide what to do only to scratch that at the last second.

      Also incompetence I've found is far more prevalent when you're broke. When you're working the razor's edge of a budget and you screw up at all--it all goes to shit. When you have a surplus budget you can usually literally buy yourself

  • And Google (Score:4, Informative)

    by mystikkman ( 1487801 ) on Sunday April 29, 2012 @06:07PM (#39840125)

    Since we're taking on the tech giants, here's Google.

    Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes

    http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html [bloomberg.com]

  • by countach ( 534280 ) on Sunday April 29, 2012 @06:08PM (#39840131)

    It seems to me all the states are in a race to the bottom to make big companies come to their state. The end game is nobody pays taxes, because states are too afraid of losing companies in their jurisdiction. The only way out is for all the states to gather together and put an end to these races to the bottom.

    • by Xiaran ( 836924 )
      Perhaps they could do things at the federal level?
      • by Osgeld ( 1900440 )

        states love nothing more than the fed's coming down and telling them what to do

        they will bitch and whine and cry and beg until offered a voucher and change nothing but a couple lines of paperwork to comply

    • by chill ( 34294 ) on Sunday April 29, 2012 @06:17PM (#39840191) Journal

      Except no one is moving to Nevada. The open an accounting office there, at most. More likely it is just a PO Box.

      Microsoft's major physical presence is in Redmond, WA and the surrounding area.

      I wonder what Washington would lose in the way of property tax and sales taxes in Microsoft moved wholesale to Nevada -- and most of their employees up and moved. I'll bet it is a damn sight more than $4 billion.

      • Vegas was a boom town when I lived there a decade ago. Reason why was because of high taxation in nearbye California. Great attorneys who specialized in California law were in Nevada oddly.

        Many companies closed down their warehouses in California and just shipped them to Nevada to avoid the taxes. Las Vegas was a great place to open a company before the housing bust.

        California is not recovering yet like the rest of the nation. Jobs are scarcely listed even though it is so populous. It is simply more economi

    • The State of Washington could have closed this loophole loooooong ago by simply passing a law, "If you operate a business here, you must pay taxes on all your income." If Microsoft doesn't like it they can pack-up and move out. I doubt the state would miss the ~1000 job loss out of millions of jobs..... it's certainly less painful that losing 4 billion in taxes last year.

  • by hemo_jr ( 1122113 ) on Sunday April 29, 2012 @06:11PM (#39840149)
    If the courts are going to treat corporations as legal persons, so should the IRS, State, and local tax collectors.
  • by Ritz_Just_Ritz ( 883997 ) on Sunday April 29, 2012 @06:13PM (#39840157)

    I'm shocked....shocked, I say! Billion dollar companies hiring lawyers to create, and then exploit tax loopholes for their own (and their shareholders') benefit? There ought to be a law...oh wait!

  • Race to the bottom (Score:2, Insightful)

    by TubeSteak ( 669689 )

    This is what competition between the States brings us.
    Corporate profits are up, wages are flat, and State tax revenues are down.

    Just wait till property taxes get reassessed downward and State tax revenues plunge even further.
    It's hard to talk about this without sounding like a partisan, but that's only because one side of the debate wants these kinds of anti-social outcomes.

  • I wonder how much tax revenue Washington State will get if Microsoft just up and leaves the state if Washington State 'punishes' Microsoft. What's 100% of zero again? I'm not good at math but I think it's zero...
    • So, how do you propose that the workers that Microsoft depends on be educated? Do you have a means of making this happen that will actually function properly, or are you just all for no taxes for companies that enjoy the benefit of public services?

      Sorry, my last post was accidentally made as AC. :-/

  • every day for god knows how long, company X is evading taxes though some loophole, and yet nothing will ever be done about it ... both the taxes and the filler

  • Blatant Lie. (Score:3, Insightful)

    by NalosLayor ( 958307 ) on Sunday April 29, 2012 @06:23PM (#39840231)
    As someone who has physically visited Microsoft's "Nevada Tax Dodge", I can tell you that they have hundreds of people employed across three office buildings, doing real work. Here's a street view: http://maps.google.com/maps?q=microsoft+licensing,+GP&hl=en&ll=39.466978,-119.777091&spn=0.014196,0.027874&oe=utf-8&client=firefox-a&hq=microsoft+licensing,+GP&radius=15000&t=m&z=16&layer=c&cbll=39.465765,-119.778911&panoid=SCavTRVJLjF335ijk_l6-w&cbp=12,0,,0,0 [google.com] The white buildings to the left and right of the frame are wholly occupied by MS while the brown building in the center has one whole floor occupied by MS employees. Declaring that MS has no right to do business in states where taxes are lower is...well, disgusting.
    • Re:Blatant Lie. (Score:4, Insightful)

      by TubeSteak ( 669689 ) on Sunday April 29, 2012 @06:49PM (#39840437) Journal

      Declaring that MS has no right to do business in states where taxes are lower is...well, disgusting.

      Declaring that MS has no right to shift income to states where taxes is lower is... well, reasonable.

  • and how it's led indirectly to $4 billion in K-12 and Higher Education cuts since 2008

    That's political theater. Cut education and call a press conference while ignoring the cesspool of waste and mismanagement that permeates government bureaucracy.
    News flash: Taxes are a cost of doing business. Costs of doing business are passed on to the consumer. Microsoft and Apple would not pay these taxes in any event. Their customers would pay them through higher prices.

    • News flash: Taxes are a cost of doing business. Costs of doing business are passed on to the consumer. Microsoft and Apple would not pay these taxes in any event. Their customers would pay them through higher prices.

      Now that you mention it, that makes sense. Someone needs to pay for a company's use of the public infrastructure, access to the blessings of liberty, etc. If you tax the company and they elect to pass it on to their customers, that means the people who are using their products and services pay for it. But if you don't tax the company, the price is spread over everybody, including those who don't use the company's products and services.

      Ergo, taxing companies is more fair to the public at large.

  • From what I have seen, businesses with as few as one employee actively seek out ways to cheat the tax code. Naturally, the larger businesses find even more creative ways to do it, to preserve even more of their own money.

    Now, is this a good argument for a "flat tax"? Probably not. In reality, if there were a flat tax implemented at the federal and/or state level, you could count on the congressional powers that be to grant special favors to their favorite sponsors that would make it far less than "fl

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