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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 don't think the guy who writes this article really understands tax law. Neither do I really, but atleast I'll admit it. It seems to me that I remember Tax Avoidance being perfectly legal and accepted. I really think he misunderstands the idea that there's some existing tax law to be enforced that applies to Microsoft's actions. The software is licensed out of NV, hence, NV law applies. There are major jurisdictional issues inherent in taxation law and so far as I can tell as a layman, there's nothing afoul of any regulation going on here.
If there were, you can be sure Washington State would have their hands in Microsoft's pockets already.
That's kind of why most corporations are incorporated in Delaware, too. There's jurisdictional issues being blatantly ignored by this person in order to make a point and that is not justified.
That all said, I did some more reading and it looks like this guy has barked up this tree before.
http://crosscut.com/2008/02/02/microsoft/11167/
which was posted to Slashdot back then
http://slashdot.org/article.pl?sid=08/02/04/1520219
and a followup with his anti-arguments to the posts from Slashdot back then.
http://www.idealog.us/2008/02/top-reader-excu.html
Oh and 2004 too:
http://slashdot.org/article.pl?sid=04/10/01/2137228&tid=109
You'll notice, a year ago, he supposedly already addressed all the issues everyone here could possibly present. Unfortunately, he's also completely ignored the one about the constitutionality of taxation and jurisdiction and focuses more on wishy washy sort of justification arguments made that appeal more to a sense of right or wrong, rather than the case law regarding jurisdictional tax issues.
Career campaigner on this issue, hey Jeff? Too bad you've wasted 5 YEARS on this subject and you're never going to get anywhere because Microsoft is DOING NOTHING WRONG.
What are you talking about? If they are burdened by Washington they can just move their developers to Nevada or another "friendly" state. Do you think Washington is the magical place where software developers perform amazingly (if you do think so, I bring Vista to the table)? Washington is making millions by taxing Microsoft employees, they can't afford to lose them.
This isn't a liberal tax and spend issue. This is an issue of a giant company guzzling state services (fire, water, police, increased road traffic, etc. etc. etc.) and letting the little guys pick up the tab. You know what? If MS isn't interested in paying its way, than fuck 'em. And yeah, they could move to Oklahoma or India, but how many of the really valuable employees are going to want to live in a backwards locality? It could be a death sentence for MS just because of the brain drain, not to mention the turmoil caused by moving.
What changed under Obama? Nothing Good
There is currently a new bridge being built over state route 520, which runs right through the Microsoft campus. This is being done to alleviate congestion on the 40th Street bridge. This new bridge will basically link two Microsoft parking lots. It will be a public road but leads to no place of interest if you're not a Microsoft employee. Guess who pays for the construction costs? Hint: it's not Microsoft.
Simply deem the licenses created in WA and sent to NV where they were sold. A license is sort of fictional anyway. Tax the exported licenses.
What changed under Obama? Nothing Good
Original poster speaking here. If you don't think they can move, check out a place like Flint, Michigan, or any of the other towns that suffered a similar fate. I can't help but look at Bellevue and think that all of that extravagance is extremely temporary.
Really? Cause all those employee's don't pay for fire, water, police, road traffic and other things. These things are used by people not the businesses I'm sick of fucks like you who want to drive out business.
Except they arnt. The state they are using to generate the revenue is Washington the state they are CLAIMING they use to generate the revenue is Nevada. This is pretty much a clear cut case of tax evasion. Its like I work in New York but i claim income tax in NJ because the taxes are lower. Pretty blatantly illegal. They should get their back taxes and slap them with a 100% over due fee to net them an extra billion.
Like our sales tax, this license tax is actually a use tax. Its collected by the vendor at the point of sale, but its based upon the jurisdiction where the product is to be used. So the only revenue WA state is going to collect is that on the sales to WA state residents and businesses. Businesses in the state are subject to audits and must show where the appropriate use tax has been paid, either in the form of a sales tax, or via their WA State dept of revenue tax returns. Anyone buying goods or services who can document a residence or business outside of WA state are exempt from the tax anyway (their home state may have similar taxes that apply). Boeing does the same thing with its airplanes (even before it became an Illinois based corporation).
Microsoft (and other companies) often sell through offices in states with no taxes. Not to avoid paying them, which they don't have to anyway. But to avoid having to document sales to exempt individuals and companies in 49 other states. Since its the duty of the end user to see to it that use taxes have been paid, the state would be better off chasing after its businesses (which it already does, to a point) and residents (which it typically lets slide) for the taxes owed.
Have gnu, will travel.
Although they do provide a lot of jobs, they tend to structure the jobs in such a way to be a drain on the government anyway. For example, they have a huge semi-permanent group of employees that they treat as temporary workers. Mandatory 2 month vacation per year (paid by unemployment insurance of course) and pitiful benefits. So whether they are a responsible good employer who is a benefit to the area or a leeching government abusing entity is up to debate. Anyway, granting a specific tax benefits is akin to government subsidies, which could be illegal under the WTO.
I must have missed something in the thread... what extra services is the state of Washington providing Microsoft to account for the additional billions of dollars of cost their governance structure provides? If we're paying for governance and one state is many times more expensive than another, is that extra cost due to it being a really high quality state or simply a problem due to mismanagement, inefficiency, corruption, misguided spending of funds on ineffective purposes and theft?
And specifically, should the difference be explained by a superior state government in Washington, are these additional high-quality services items that Microsoft would value? For instance, it could be argued that if Washington had state school districts that were 50% better than Nevada's, Microsoft employees would receive a value for the expense (although it could be effectively argued that such an expense should be applied more directly to the recipient of the educational service). Perhaps Microsoft benefits from a better state corporate liability law system? Or better roads infrastructure to their campus?
I don't blame MS for being creative with their world-wide operation taxes. If Washington State is stupid and attempts to steal payment, then MS will move their headquarters off-shore, not just to another state.
Barbados, here comes Microsoft. Congratulations.
I know this isn't a popular stance, but what happens to all the USA government use of an OS that isn't built here? .... Washington, tax the HELL out of MS ASAP! That will help Linux, when the USA Federal Government mandates use and requires all providers to support Linux.
If you live in Washington, you have to pay more taxes because Microsoft is avoiding theirs. Your attitude only makes sense if you're a Microsoft exec or major shareholder. If you're not, you're cutting of your nose to spite your face.
Sales tax is regressive? Is that a problem?
Who should be taxed more? A businessman (lets call him Warren) who earns a huge amount of money, but invests it back (creating more jobs), and lives a normal life; or a rich heiress (lets call her Paris) who earns a moderate amount, but spends a huge amount on consumer goods?
I like consumption tax, because it encourages people to live a balanced life.
If you want to help poor people, there are other ways. Improve buses. Fund public schools and hospitals. Etc.
Mmmmmmmmm....I don't agree, though I'm open to seeing data otherwise, if there is any.
There are a hell of a lot more options open to wealthy people than to the likes of you and me. Many of those that maintain homes in the high-tax cities have their *residence* elsewhere. One example is Ted Turner. His main business is based out of Atlanta, and he has a house or condo there. But his declared residence is the ranch in Montana, where taxes are cheaper.
Several movie stars and sports figures (John Travolta and Shaquille O'Neil come to mind) have their *residence* in income tax free Florida. Many celebrities have homes in Idaho, Washington or Florida where taxes are low, or non-existent. Texas is another haven, with no personal income tax.
Leona Helmsley once said "only little people pay taxes", and she was more correct than most people realize. The system is devised that if you have a lot of money, and know what you're doing, you don't pay a lot of taxes.
Learning HOW to think is more important than learning WHAT to think.
Who should be taxed more?
Allow me to propose better questions:
1. Who should be shot for spending the USA into a $12 trillion debt?
2. How do we start spending less?
lets examine his claim about post dating 13 years of taxes. if this has been law for 13 years why haven't they gone after MS before now, if MS is cause why weren't we in deficet 13 years ago?
If you mod me down, I will become more powerful than you can imagine....
The problem with the "Well they are using resources," argument is that you should be getting money for those resources through your taxes on the things they use. Yes, I agree that they need to help pay for thing in the state. That is why you tax their property, tax the electricity they buy, tax their payroll, etc. You tax the things that actually represent their usage. If they have a 100,000 sq ft plant, they should pay property tax on that. It clearly uses resources, land not being the least of those, so you tax them for owning it, much like all of us who own houses pay property tax.
The only reason Washington is bitching is because they have a big budget shortfall. Part of that might be because they don't have an income tax. Ok well I'm sure that is popular with your voters, but it isn't a good way of running things. A state income tax is a reasonable way of making sure that people who use state resources pay for them. You earn money living in that state, you pay out some of that money in tax.
I really don't see they have any room to bitch about this. You don't like that a multi-national does business in different places? Well too bad, that's how it works. They can always leave, and then you'll get nothing.
The trick is to find a good way to tax people and companies such that they pay for the things they use in the state, will not making it too onerous to any group, so that they are tempted to leave. However it seems legislatures sometimes look at big employers as just massive money pits. "Oh we'll just charge them more, they can afford it." Well, maybe they'll leave if you do that.
Rainbird did that to California. They had their headquarters there but it was getting prohibitively expensive. So they relocated to Arizona (where they had a big manufacturing plant). Their employees were generally happy too since cost of living was less.
I don't have a lot of sympathy if a state does something like eliminates an income tax to panders to voters, and then tries to make it up with company taxes. If the companies then leave, well that's what you get. Have to try and make taxes fair to everyone, because in a free country, they always have the option of packing up and moving somewhere else.
And when the mexicans run across the boarder and have babies in the closest ER, they pay taxes on almost everything they buy, except basic food, on the way there. If our tax was income based, the state wouldn't get a penny out of them.
I understand the arguments against a sales tax, but it sure is fair in that almost everyone pays them, not just those in the middle, because with an income tax, the rich and the poor get out of paying them.
About the only way I know people get out of sales tax is to buy only food (not realistic), order things from out of state (legit, but you can't order everything), or have some type of home/small business and lie about things you are buying to "resale" (and that does happen, but not on a large scale).
transporter_ii
Doctors destroy health, lawyers destroy justice, universities destroy knowledge, religion destroys spirituality
Oh-kay, I'll be up front and honest. I enjoy bashing MS. Given a decent reason, I'll dump on them, 'cause I just don't like them. So, I really would feel good if the state went after all those lost revenues.
BUT - it isn't just MS. At least 70% of all corporations in the US are incorporated in a state that favors the corporation and/or use some very imaginative BS accounting procedures to make sure that no government gets any more than an absolute minimum of taxes.
I would really, really love to see taxes restructured to eliminate all those sneaky ass tricks that all those corporations use. There are so MANY things that we can't do, like
A. get a city to finance new construction for us
B. get huge tax break promises for locating a business in a state/city
C. hire foreign nationals at reduced wages AND get government subsidies for those workers
D. break promises to the government based on sneaky loopholes - if I tell the city I'm going to do something, they are going to hold me to it.
I could go on for a bit - if I resorted to Google, I could go on for quite a long while!!
Few corporations are carrying their tax load in this country. Many of those that are carrying a tax load, like IBM, are moving out of the country to escape any responsibility.
Something is terribly wrong here.
So, yeah, go after MS, but that should only be the warming-up exercise.
"Windows is like the faint smell of piss in a subway: it's there, and there's nothing you can do about it." - Charlie Br
sales tax is only 'regressive' if you measure the expenditure as a percentage of income, which is totally arbitrary. that phony definition plays on people's classism to sway them one way or the other. sales tax when measured against the actual tax base is not regressive and in the US is actually more 'progressive' in that some goods you need to survive have no sales tax.
FLAC - Free Lossless Audio Codec
See "Nevada Corporation" or "Delaware Corporation".
There's nothing illegal about what Microsoft is doing. They're simply incorporating in a state that gives them the best tax breaks.
This is part of their accounting department's JOB.
Thousands of corporations, from behemoths like Microsoft, down to little one-man shops incorporate in Nevada and Delaware.
Why?
It's cheap, the state keeps their hands off your income, and the state makes up the monetary difference in quantity.
Qualifying this as "Microsoft's Cheat" is just someone running off at the mouth, talking about something they don't understand properly.
Note: There IS a flip side to this. Because it is known to be cheap to incorporate in certain states, corporations from those states tend to have tougher times pulling lines of credit in their early years, until they have a proven track record.
This bias really doesn't affect Microsoft. They're huge, rich, have been around over three decades now, and are essentially a household name (God help us).
Chas - The one, the only.
THANK GOD!!!
"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." - speaking as someone who has lived in Delaware for most of his life, this is false. I don't believe Delaware has an especially lax/favorable corporate tax system. Unless I'm mistaken, corporations incorporate in Delaware (a) because Delaware has the most favorable bankruptcy laws, and (b) because the Delaware Court of Chancery is the best Chancery court in the country (And, unlike most courts, the Chancery court is able to hear issues arising in equity rather than law. This has had profound legal implications in the past related to, among other things, desegregation. See Gebhart v. Belton, the only time separate-but-equal was beaten prior to Brown v Board of Education case)
To make laws that man cannot, and will not obey, serves to bring all law into contempt.
--E.C. Stanton
And its also ok, to have your US business with corporate headquarters in the caymans, because that isn't cheating the system, either.
You want to show us how patriotic you are, corporate America? Pay your fucking taxes like you are supposed to.
HA! I just wasted some of your bandwidth with a frivolous sig!
Would Washington be a better place if MS just pulled up roots, and moved to another state? Another country?
A better question is this. Would the United States be a better country if we unleashed the "nuclear option" on entities that avoided paying their taxes and then added further harm on top of that by moving outside the USA?
Fuck yea. It's called treason if anybody else does it. If Microsoft does it, then it's time to revoke their corporate charter and seize all their assets. It's called the "corporate death penalty" and that's what we do when we can't put the traitor up in front of a firing squad.
Now quit being such a corporate apologist. Companies need to pay their taxes, just like you and me.
Fascism trolls keeping me up every night. When I starts a preachin', he HITS ME WITH HIS REICH!
Okay, now I'm angry. This 'spends more on healthcare, but has lower numbers' idiocy has to stop. Think of the logic: it's the same thinking the government has: following numbers off cliffs. How about 'has lower lifespans because of...lifestyles'? Americasn aren't known for being averse to risk taking, you know, on every level: it's what makes things interesting. The U.S. also tends to have more sane handling of numbers in heath statistics, by the way, (not that government, or the agitproping media, handles them sanely, or honestly). We consistently count infants deaths for mortality figures, for instance: much of the world won't count deaths days after birth. :(
And frankly how are they tabulating 'standard of care'? How are they quantifying 'standard of care'? Really...really...SOMEBODY ENLIGHTEN ME, AND HOW THE FRICK DOES SOME GUY IN THE U.K. HAVE A CLUE?
Intelligent idiots are we. | Evil men do not understand justice.
Who should be taxed more? A businessman (lets call him Warren) who earns a huge amount of money, but invests it back (creating more jobs), and lives a normal life; or a rich heiress (lets call her Paris) who earns a moderate amount, but spends a huge amount on consumer goods?
I've read several economics books that propose the most efficient way to tax people is to rarely, and at unpredictable times, assess their income or worth, and tax it as a percentage. This way you don't tax trade, which is presumably good. Making the precise time period of taxation random(ish) and unannounced means that there is no way to game the system by temporarily giving your wealth or income away. It sounds like an economists dream though, the reality of implementing such a system would be rather difficult.
taxing people on what they spend instead of what they earn encourages savings.
Increasing sales tax just means that people get less stuff for their money. Most people will spend a fixed amount of whatever income level they have. So a 10% sales tax means exactly that - they spend the same, but get 10% less stuff in return than they would have when compared to a 0% sales tax. That does not necessarily encourage saving, which would be subject to (in various jurisdictions) savings tax, capital gains tax, and associated investment and management costs. What encourages saving is a legal way of protecting those savings from the associated costs and taxes (e.g. an ISA type scheme).
>>>I'm not sure what to think of the situation
I think taxing corporations is pointless. For example if Washington State pisses off Microsoft, then they will simply move somewhere else - like Detroit. 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.
A wiser is course is not to collect the taxes from the corporation itself, but from the corporate employees and stockholders. Tax the people not the entity.
"I disapprove of what you say, but I will defend to the death your right to say it." - historian Evelyn Beatrice Hall
Well, being one of those archaic throwbacks, I don't think the problem is all the tax dodging going on. The problem is all the taxing going on.
I'd like to see fewer government services and less government meddling in my life. The problem with most tax laws is that they're crafted by the wealthy, by corporate interests and with lobbyists overseeing the process. You know what that means? Even if it looks good on paper that it's going to be "fair" and "tax the rich" or "tax corporations" the only people that are going to pay the lion's share are the middle class and upper middle class.
Not that any of it matters anyway. We live in a country full of people who simultaneously distrust the government and yet, still want it to solve a bunch of problems they have no faith it'll solve and who can be lead on by the most trite of messages (hope and change anyone?).
"But we can vote! That makes us free. We're a democracy. Democracies are free and good." And yeah... so long as you think you're the best kind of slave.
Do I think avoiding taxes is moral? Yeah, sure do. If there's one organization that I think can do MORE damage with excess money than Microsoft, it's a government at any level. I want governments to have money on about the same level that I want crack addicts to have crack. It's just out of control.