Slashdot Mirror
Microsoft Tax Dodge At Issue In Washington State
newscloud writes "With Washington State facing a billion-dollar biennial budget deficit, the spotlight again shifts to Microsoft's software licensing office in Reno, Nevada. 'Although the majority of its software development is performed in Washington State, Microsoft records its estimated $18 billion in licensing revenue per year through a corporate office in Reno, Nevada where there is no licensing tax. Just by enforcing the state's existing tax law from 2008 onwards, we could reduce Washington's revenue shortfall by more than 70 percent. Alternately, we could pursue the entire $707 million from Microsoft's thirteen years of tax dodging and cover most of the expected deficit going forward.' We have discussed Microsoft's creative capitalism in the past."
...I can't see how anyone could expect Microsoft to act differently.
There appears to be a legal loophole that has allowed Microsoft to hang onto $707 million over the years. Until a judge rules otherwise, they're going to exploit that loophole. When the loophole is closed, Microsoft is going to look for a new one. Can you say you'd act any differently?
What's that? You do act differently? You pay your taxes, you say? Well then... it sounds as though Washington would have better luck recouping its money if it simply raised the state income tax. Presumably all of the employees at Microsoft's Redmond campus file taxes in the state, yes?
Breakfast served all day!
... and threaten to move out. If MSFT leaves or even reduces force, greater Seattle's retail and real estate would be crippled, not to mention sales tax and property tax revenues. I'd like to see those taxes paid too, but unfortunately MSFT has the greater bargaining chip here.
Among my favorite are "but Microsoft will just move outside of the U.S." Like hell they will. You think all those C-levels, VPs and billionaire executives will want to move? And the interruption of process? The huge shift in culture? And the public opinion of Microsoft will surely enable any Microsoft competitors. And finally, if they moved out of the U.S., they wouldn't stop selling to the U.S. and you can bet there would be LARGE tariffs imposed on the import of Microsoft Software and could you imagine the new problems they would have to face being a "foreign business" selling critical systems software and infrastructure products to sensitive areas of government? Bad enough they are local, but a foreign company selling the US government crappy software?
The various problems and changes that would result are too many to imagine.
Probably best that Microsoft pay their damned taxes like everyone else.
Way to blame MS for using state resources without contributing to that cost.
What changed under Obama? Nothing Good
2. I single out Microsoft because it's, by far, one of the biggest offenders, but I would like to see the uniform enforcement of state tax law to all corporations using out of state facilities to minimize tax payments.
I definitely agree. Would be great. But as someone stated above, you can't expect one company (in this case Microsoft) to be forced to follow a rule and then not force the rest of the companies. Well, I suppose you could, but in all fairness, should Washington, or any other state, be able to single out one offender, leaving others to get away with the same? Uniformality in this would be best.
There is this line in the article: "Just by enforcing the state's existing tax law from 2008 onwards, we could reduce Washington's revenue shortfall by more than 70 percent." What? The law that says Washington state can tax business transacted in another state? They want to CHANGE THE LAW, not enforce existing law. Maybe if the state were to partner with MS and not view it as their own personal ATM, they could close a bit of their defecit. Is the Washington State economy really based on anything more than Software, Airliners, "The World's Largest Store" and over-priced coffee?
Ken
Way to blame the state's shitty accounting and fiscal responsibility on Microsoft. They pay for their facilities taxes, employee taxes etc. The licensing issue is a NON-issue. I don't see why it's a big deal for a company to use certain states for the divisions they choose.
Basic economics. Corps don't pay taxes. Taxes are a cost. Costs get passed on to customers, shareholders and employees. They get passed on to you. You who buy any products made by corporations. You who has money in a 401K, Roth or any form of interest bearing account. You you work for a corporation.
There is no one else. Get over it.
"It is better to die on one's feet than to live on one's knees." - Albert Camus
The word is "Value Added Tax" boys and girls. This is why states like Michigan have them. Companies can "move the cheese" all they want, but each organizational unit has to account for it's "productivity" i.e. the added value of their step, not just whether they made "cash profit" in order to satisfy SEC and GAPP rules. Manufacturing states learned long ago that the parent company will always make manufacturing into "cost centers" that always lose money on their operations because they don't "sell anything", both to stiff workers and the taxman. They learned to make each part of the company rate the "value" of it's incoming raw goods versus the "upstream" items. The numbers have to add up on "somebody's" books so it's easier to get the tax money where the work is done.
VAT is closer to what we plebs pay as "income tax" rather than just pure "profits tax".
#1. Sales taxes are the most regressive form of taxation.
#2. The state does not get a cut of the money that you spend out of state. Which is an issue when you're talking a large number of millionaires or better.
So help me understand this:
1. Microsoft is the 3rd largest employer in your state
2. You are in a recession
3. You have a 9.2% unemployment rate
4. You want to raise taxes on business.
So that your government has more money to redistribute to people who are not working, who lost their jobs because companies like Microsoft couldn't afford to keep them on in the first place.
Let me propose an alternative.
Reduce your spending and reduce taxes so that you can afford to pay your bills, and Microsoft can afford to rehire your residents.
Yes, but MS has to pay its taxes the way that other businesses do. And that's the point, other businesses pay the tax and their employees pay sales tax as well.
And if you're seriously suggesting that a sales tax is better than an income tax of similar income, then you really need an economics lesson, badly.
From Kerry Packer, Australian media billionaire before the Print Media Inquiry (1991)
"I am not evading tax in any way, shape or form.
Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."
I've already given you the answer on this subject, I have told you that I pay whatever tax I am required to pay under the law, not a penny more, not a penny less, and the suggestion that I am trying to evade tax, which is what you're putting forward, I find highly offensive and I don't intend to cooperate with you in the blackening of my character.
Domestic spying is now "Benign Information Gathering"
A tax on profit != a cost of production.
Products and services are already priced to maximize revenue. If Microsoft (or any other company on the planet) can charge customers more money without consequences to their bottom line - they'll go ahead and charge their customers more.
Microsoft is DOING NOTHING WRONG
They're doing nothing illegal, which is quite a different thing--as you pointed out earlier in your post.
They thought the same about Boeing. It's now in Chicago.
You want to keep the seat of leadership where you have some hope of seeing a benefit. (Consider Bentonville, AR.) They can move anywhere, anytime they want to. And they have the fiduciary responsibility to do so, or will be sued into oblivion by their own shareholders.
Microsoft has to pay other taxes, just not this one, to Washington. There are a slew of taxes that corporations have to pay.
The act of licensing a product doesn't actually use state resources.
If Microsoft licenses 2,000,000 $250 copies of Vista, it doesn't utilize any more state resources than if they had licensed 200,000 copies of vista, or if they had licensed 2,000,000 $100 copies instead.
You might think it implies they hire more support people in Washington, and thus further use state infrastructure... but it doesn't, thanks to outsourcing and call centers in India.
And most copies of Windows licensed are OEM, and volume licensed, which doesn't generate additional support demands.
Well, I've not seen anywhere on the article, nor on this forum, a listing of what laws were broken.
I mean, corporations do this all the time...many companies incorporate in Delaware for the tax breaks they get, even while most of their manufacturing/business/warehouses are in other states. While you might rightully bitch about the 'moral' aspect of this...if they really broke no laws on the books, then they did nothing wrong legally.
Would Washington be a better place if MS just pulled up roots, and moved to another state? Another country?
I'm just curious...why are tax revenues so bad in the state where a company like MS is employing what I could guess is a good number of people and what I would guess were pretty good salaries/bill rates? What is the state income tax like there? What is the sales tax there? What is the property tax there?
Most states get most of their money from many or (in the case of my state ALL) of these.
I'm just saying...if MS (and I can't believe I"m defending MS here) actually broke no tax laws, then you really can't accuse them of tax evasion. It is not against the law to work within the law. If you don't like the tax laws as they are, change them. Just don't be pissed if they then leave the state. Other states would be thrilled to have the high paying jobs within their borders.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
If Washington wants Microsoft to book their sales in their state, then they should remove the disincentives in their tax code that make it worthwhile for a company to maintain a subsidiary in another state. As it is, the state of washington makes hundreds of millions of dollars from other taxes paid by microsoft and their employees.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
And if you're seriously suggesting that a sales tax is better than an income tax of similar income, then you really need an economics lesson, badly.
No, you do. While all taxes are a disincentive to production, taxing people on what they spend instead of what they earn encourages savings.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
"The Bill & Melinda Gates Foundation broke ground Tuesday on its new $500 million headquarters, which the world's largest charitable foundation hopes to occupy in late 2010."
Just how much do you think a nearly million square foot complex in downtown Seattle should cost, capable, as you said, of supporting 1200 employees.
The headquarters are being paid for by the Gates' directly, not out of the $38B endowment they've set up.
Yeah, "using its $37.3 billion endowment to fight diseases like AIDS and malaria, start a green revolution in Africa, improve American high schools and provide Internet access at libraries throughout the world" at a minimum mandated level of $1.5B/year sounds fucking horrible and selfish of them, if you ask me.
"Other states will see this and, if they manage to grow a pair, will also tax them"
They won't. Delaware has been a haven to corporations forever. Florida and Delaware are considered low tax states and thus they benefit by attracting lots of people who pay a little bit of taxes.
We can argue this all day long, but the results are there in front of you. It's already happened.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
Speaking of tax evasion, you're still required to pay State sales tax regardless of buying it online. The differernce is whether the company is required to collect it on your behalf.
Not claiming that on your taxes is tax evasion, but so far the States haven't cracked down on it, other than a few noteable examples. Search on Michigan going after folks buying mail order cigarettes. Yeah it was the cigarette excise tax they went after, but what's stopping them from pursuing other major retailers for a list of customers who dodged the sales tax?
Why shouldn't they tax licensing? You think it's not a product? Get real.
I also hope they stick it to Microsoft good. With their huge campus in Washington there's no way they should be able to dodge taxes by "selling" out of Nevada, period.
"I'm just curious...why are tax revenues so bad in the state where a company like MS is employing what I could guess is a good number of people and what I would guess were pretty good salaries/bill rates?"
Because Washington has no income tax which is a major reason Microsoft is based there and Bill Gates lives there. They depend on property taxes among other things, which are probably having a substantial shortfall in a crashing real estate market.
Corporate taxes are a lot like the Internet, no one wants to pay for anything, they just want a lot of cool things for free, you know like highways, schools, universities, prisons(so there isn't so much crime). Not sure if they still do but there was a time Microsoft was using prisoners as ultra cheap labor to pack products.
Not versed on tax law enough to say if Microsoft is breaking the law but its a given they are bending it to the absolute limit if they aren't out right breaking it, like most big corporations. They want the middle class working people to pay all the taxes.
I'd seriously like to see Washington put the smack down on them and see Microsoft pull up stakes and move to the nice repressive one party dictatorship that is China and see how Microsoft's execs really like it there if they actually have to live and work there. Or move to India and live in a tiny high tech pocket of affluence in a country with otherwise grinding poverty, serious ethnic and religious tensions and a near perpetual state of war with Pakistan.
@de_machina
Your words suggest you believe only the "current administration" is the problem?
Sorry, but it's pretty naive and, as you say, short-sighted, to think that the previous administration was any better, or that the future one will be.
Down with the career politician! SUPPORT TERM LIMITS
Or be the member of a board for a corporation and buy everything except basic food on the Corp credit card, buy a house through the corp then rent it off the corp, own nothing and take a tiny salary. Then send the corporations profits to a shell account in the cayman islands then claim your expenses back as a cost at tax time claiming the corp is not profitable, your offshore account unreachable by the tax man to see if your lying or not.
Effectively paying no tax.
As many thousands of the upper class do.
Oh I forgot, then have misguided middle class individuals argue for your right to continue doing this. While lobbying your mates in government to increase the tax burden on them because your corp needs infrastructure built and a solid and expensive society to exist to continue being profitable in your highly "unprofitable" venture (wink wink).
Then laugh all the way to the bank come retirement.
Can we get an administration in office that understands some economics?
So you mean encouraging imports over exports, removing corporate personhood, supporting cooperatives and small scale businesses and breaking up large monopolies? Or do you really believe the last 8 years haven't been completely dysfunctional, too?
You're not versed on tax law so wtf makes you think you can even state they are pushing the bounds? It is either illegal or it isn't, and given that thousands of companies big and small do the same thing MS is doing I doubt its legal status is particularly contentious.
An individual or company is doing nothing wrong by minimising it's tax liabilities in a legal way. If the tax system is either poorly thought out or full of 'loopholes' then get those fixed. Generally, one of the biggest problems with western tax systems is complexity. Simpler taxation tends to be fairer.
In the UK we have an incredibly complex tax system, we get taxed on savings (except ISAs which can only have so much paid in per year, and that quantity varies depending on whether you want to save only cash or cash/shares). If you own sufficient assets it can be worth creating a corporation and gradually transferring ownership to your children to avoid inheritance tax etc. This complexity virtually always benefits the rich, as only experts can understand enough to play the system well.
if you call extorting the state hiring a bunch of people -- who all pay local taxes -- building a massive campus with local contractors -- who all pay taxes in the state -- then -- yeah they are totally extorting them. Or -- should the state get a cut of a transaction that happens in all 50 other states that has almost nothing to do with them -- but more likely ms sales people that work elsewhere. MS is doing what every other software company does -- work within the law to not pay taxes to states that they don't have to. And its also perfectly legal when the state says that they will change the law -- to tell them that that will have a consequence. Governments think that they have a right to take a piece of every transaction they see - they also think that if a company has to charge more that their sales wont be affected making it free money for the state. They are wrong on both. A business like Microsoft understands that and you can be sure their shareholders would have a fit if they said -- hey our home state couldn't figure out we were in a recession and kept spending money and ran a deficit -- so were going to lend them a hand. And while were all being righteous about making sure we all pay our taxes here -- whens the last time anyone on this forum filled out a sales tax declaration after buying something on-line? That stuffs not actually tax free -- its just that the vendor doesn't have to collect it. You are still supposed to pay it.
Actually, the studies that I have seen are looking at expenditures on care, and resulting outcomes of the patients that received the care. The outcomes are largely uncorrelated with variations in spending across the US, which vary by almost 100% from lowest to highest, and are universally somewhat worse than similar outcomes from the Canadian, British or French systems for similar cases. They're not horrible, but they aren't the best despite radically higher spending on a case by case basis in the countries with the evil commie plans.
GP talks about government waste. Medicare, the US government run health system for the elderly, has about half the administrative cost load of private insurance companies, and aggressive negotiates for lower treatment costs. It could have been a force for lowered drug costs, but Congress specifically prohibited that. The government waste tends to come from Congress, not the rank and file.
I was taught to respect my elders. The trouble is, it's getting harder and harder to find some.
Think about it. Every dollar someone makes is taxed with income taxes (and sales taxes for a lot of them). That same dollar, keep your eye on it, gets spent, someone else gets it, for producing a good or service that it is exchanged for. They in turn are taxed on it. And again, and again, and again. And it just keeps going like that. Dollars get taxed on themselves several times over what they are worth, and they start as private bank debt notes to begin with and are loaned into existence. And because this is an exchange of debt instruments for debt instruments, the original "fee" that the lender charged can never be "paid off".
It's the biggest complicated ongoing set of economic frauds out there, since they switched from money being representations of past produced wealth (or intrinsic wealth directly), with a natural scarcity that more reflected the real market, to representations of poof created "credit" by some anointed private contractor to the government, which is all the "Federal" reserve is, a private contractor that took over which was legally supposed to be Congress's job on setting the value of the officially recognized and accepted currency.
And that's why we have such an economic mess today, one of the main reasons, they opened up the legal possibility of unlimited future calls on your labor to the banking establishment, "just because", with *no way possible even theoretically* to ever "pay them off".
I bet the politicians in Michigan would be thrilled to offer MS a brand-new building, taxfree status, and other benefits in order to hire their ~15% of unemployed citizens.
You seem to be assuming that the unemployed of Michigan are instantly interchangeable with the existing MS employees. Something tells me that that probably isn't the case for the majority of their employees. Looking at just code monkeys, does Michigan even have residents with the right skillsets? Nevermind the intimate knowledge needed in order to immediately jump into one of MS's projects. If MS were to move, it would probably be far more cost effective to pay for the relocation costs of the current employees, than to retrain new employees from scratch.
"I'm not sure I like the fugnutish tone you used in your post!" -RogL (608926)-