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Microsoft The Almighty Buck

Microsoft Tax Dodge At Issue In Washington State 681

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."
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Microsoft Tax Dodge At Issue In Washington State

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  • by Anonymous Coward on Tuesday September 22, 2009 @09:07PM (#29510719)

    Way to blame microsoft for the state deficit.

    • Re:Dodgy statesmen (Score:4, Insightful)

      by anagama ( 611277 ) <obamaisaneocon@nothingchanged.org> on Tuesday September 22, 2009 @09:14PM (#29510771) Homepage
      Way to blame MS for using state resources without contributing to that cost.
      • Re:Dodgy statesmen (Score:5, Insightful)

        by zoloto ( 586738 ) on Tuesday September 22, 2009 @09:37PM (#29510935)
        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.
        • Re:Dodgy statesmen (Score:4, Interesting)

          by plague911 ( 1292006 ) on Tuesday September 22, 2009 @10:07PM (#29511117)
          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.
          • Re:Dodgy statesmen (Score:5, Insightful)

            by cayenne8 ( 626475 ) on Tuesday September 22, 2009 @10:36PM (#29511341) Homepage Journal
            "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."

            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.

            • Re:Dodgy statesmen (Score:5, Informative)

              by NewbieProgrammerMan ( 558327 ) on Tuesday September 22, 2009 @11:09PM (#29511555)

              What is the state income tax like there?

              I can't speak to any of your other questions, but Washington state has no income tax (yet).

            • Re:Dodgy statesmen (Score:5, Informative)

              by binary paladin ( 684759 ) <binarypaladin@gm a i l . com> on Tuesday September 22, 2009 @11:09PM (#29511557)

              As the Supreme Court has made clear:

              tax avoidance != tax evasion

              The first is legal. The second... not so much.

            • Ya no kidding (Score:5, Interesting)

              by Sycraft-fu ( 314770 ) on Tuesday September 22, 2009 @11:27PM (#29511653)

              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.

            • Re:Dodgy statesmen (Score:5, Informative)

              by Anonymous Coward on Tuesday September 22, 2009 @11:52PM (#29511805)

              ...many companies incorporate in Delaware for the tax breaks they get, even while most of their manufacturing/business/warehouses are in other states.

              This is a common misconception. Delaware was attractive not because of tax breaks (there is a DE corporate tax), but laws that shield large corporations against lawsuits from shareholders. That is the reason big corporations incorporated there. And they kept offices elsewhere to avoid the taxes :)

              This has been changing though as other states (such as Nevada) have adopted similar laws.

            • Re:Dodgy statesmen (Score:5, Insightful)

              by demachina ( 71715 ) on Wednesday September 23, 2009 @01:11AM (#29512213)

              "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.

              • Re:Dodgy statesmen (Score:4, Insightful)

                by N1AK ( 864906 ) on Wednesday September 23, 2009 @04:03AM (#29512867) Homepage

                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.

                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.

          • Re: (Score:3, Interesting)

            by Chas ( 5144 )

            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

        • Dodgy businessmen (Score:4, Interesting)

          by TiggertheMad ( 556308 ) on Wednesday September 23, 2009 @01:42AM (#29512331) Journal
          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.
      • Re:Dodgy statesmen (Score:5, Insightful)

        by mysidia ( 191772 ) on Tuesday September 22, 2009 @10:25PM (#29511273)

        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.

    • Re: (Score:3, Interesting)

      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

  • by PCM2 ( 4486 ) on Tuesday September 22, 2009 @09:09PM (#29510729) Homepage

    ...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?

    • by anagama ( 611277 ) <obamaisaneocon@nothingchanged.org> on Tuesday September 22, 2009 @09:18PM (#29510805) Homepage
      No state income tax. Instead, WA taxes the shit out of small business. It can be especially hard on retailers because the state B&O tax is based on gross revenue, not profit. In other words, it is totally possible to run a money losing business and owe taxes on top of that. As a small business owner in WA (profitable thankfully), this story has me totally pissed.
  • by Anonymous Coward on Tuesday September 22, 2009 @09:09PM (#29510735)

    ... 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.

    • Re: (Score:3, Insightful)

      by erroneus ( 253617 )

      The government simple cannot and should not "roll over" for business. That has simply got to stop. If Microsoft had to move, it would be EXTREMELY painful and it would probably be an active news story for the next months following that. Government needs to finally and at last stick to its guns and push for it. Let'm go...if they actually would go. Other states will see this and, if they manage to grow a pair, will also tax them... though they'd probably end up in Texas where the law says all you have t

      • by Anonymous Coward on Tuesday September 22, 2009 @09:34PM (#29510913)

        No. Other states will see this and say "gee, I'd love just 1% of Microsoft." And lower the tax rate just to attract them.

        If you don't think they would move, then riddle me this. Why did they set up the Nevada shop in the first place? If not motivated by tax.

      • by FooAtWFU ( 699187 ) on Tuesday September 22, 2009 @10:01PM (#29511081) Homepage
        I'm dubious about the concept that Washington state deserves a slice of a cool billion dollars or so from the-rest-of-the-world just because they have developers in the state. If Ford were to put a factory in Redmond where they make cars, does Washington have some moral right to collect taxes on all the cars sold by Ford anywhere? (Or even just all the cars sold by Ford from that factory?) How about a factory and the corporate HQ building? How about corporate HQ, a factory, and a random dealership? What's so special about any of those workplaces that they should expose the company's entire product line to a certain tax regime? What makes that "fair"? The whims of the legislature of the state of Washington and whatever situational ethics they may or may not have today?
        • Re: (Score:3, Insightful)

          by Uberbah ( 647458 )

          I'm dubious about the concept that Washington state deserves a slice of a cool billion dollars or so from the-rest-of-the-world just because they have developers in the state.

          And if you're a Microsoft exec or a major shareholder. If you're not, why do you want to pay more taxes so a corporation with more money than God can dodge their taxes?

      • by steveha ( 103154 ) on Tuesday September 22, 2009 @10:35PM (#29511327) Homepage

        The government simple cannot and should not "roll over" for business. That has simply got to stop.

        Okay. Please name several instances where the Washington state government has "rolled over" for Microsoft; please provide references so I can check up on them.

        I am not aware of any "rolling over" by the state government. Microsoft is a Washington company. It pays its Washington business tax, its various real estate taxes (and those are freaking huge because Microsoft drove up all the property values remotely close to its headquarters), and the employees of Microsoft live and shop in the state, thus paying real estate taxes, sales taxes, and restaurant taxes. In short, Microsoft has brought a whole bunch of money into Washington state's coffers. I'm sure the state would like some more, but Microsoft is not illegally evading taxes, as far as I know.

        And I don't hold it immoral for Microsoft to game the system in exactly the same ways that every other company does. As others have noted, how many companies are incorporated in Delaware?

        If Microsoft had to move, it would be EXTREMELY painful and it would probably be an active news story for the next months following that.

        You cannot use that particular threat forever; eventually the company gets tired of it, and actually moves.

        Case in point: Boeing. Boeing did finally get fed up with Washington state, and they moved their headquarters to Chicago. Airplanes are still assembled in Washington, at least for now. Boeing executives publicly claimed that they wanted to be in a different time zone, but I don't believe that; for years, Boeing had been negotiating with the Washington state government, trying to get a better deal, without success; Illinois offered them enough to make it worth the move.

        http://money.cnn.com/2001/03/21/companies/boeing/ [cnn.com]

        Boeing actually moving their headquarters was a big shock here, and I would not be surprised if Washington state would be willing to do a certain amount of "rolling over" if Boeing threatened to move the airplane assembly as well. That also goes for Microsoft: I'll bet the state government would do quite a lot of "rolling over" if that is what it took to stop Microsoft from leaving the state.

        Let'm go...if they actually would go. Other states will see this and, if they manage to grow a pair, will also tax them...

        I'm afraid that's not how it works. Other states would go "OMFG we have a chance to get freaking Microsoft in our state" and they would start thinking about all the tax revenues that would be shifting from Washington to their state. They would start offering deals to Microsoft.

        And it is just as legal for Microsoft to shop around for the best state to move to, as it is for you to shop around for where you want to live. I, and no doubt many other people, prefer living in Washington state rather than Oregon because Washington doesn't have a state income tax, and Oregon does. Am I a bad person for not moving to Oregon and paying Oregon income tax? Am I somehow cheating Oregon out of the taxes they could have had if only I had moved there? Is Microsoft a bad company for legally shifting money to another state where the tax situation is more favorable?

        steveha

      • by tkrotchko ( 124118 ) on Tuesday September 22, 2009 @10:51PM (#29511437) Homepage

        "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.

  • by erroneus ( 253617 ) on Tuesday September 22, 2009 @09:12PM (#29510753) Homepage

    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.

    • by Sir_Sri ( 199544 ) on Tuesday September 22, 2009 @09:51PM (#29511009)

      As though all of their competitors aren't essentially doing that already. Even MS has development in India now (and other countries, not all of which count as third world). We (on slashot) got all up in arms over IBM offering employees the chance to keep their jobs by moving to india, the main architecture for intel desktop CPU's was developed in Israel. Sure, moving out of the US would get them bad press in one place, but it would get them really good press elsewhere. Everywhere outside the US assumes the US is using MS to spy on them (which it probably is) and the US assumes everyone else is trying to inject people into big companies to spy on them (they are).

      The nature of the modern world is that at least half of anything worth having is made somewhere other than where you are. Want to buy fighter jets? Good luck getting electronic control systems and displays that aren't made in east asia. Want to buy software? There are developers contributing code from all over the world.

      As it is RIM (blackberrry) is a foreign company selling critical systems infrastructure in the US. And the US has a plethora of free trade agreements, MS could very smartly move its official HQ to somewhere cheap (Switzerland), with free trade to the US and watch the government cringe as it has to fight through years of losing court cases on whether imposing tariffs are legal.

      As the guy above says, they could just move to a more tax advantageous state too rather than jump ship entirely.

    • by Zalbik ( 308903 ) on Tuesday September 22, 2009 @09:52PM (#29511011)

      Or they could just move 140 miles north to Canada. Very minor shift in culture, no language barriers, no tariffs, and the US government already uses a proprietary Canadian OS on some of their devices [rim.com].

      Or they could just move to Nevada.

      In any case, the article doesn't provide any evidence that Microsoft is doing anything illegal, though they heavily imply it. The article links to a couple of other sites (written by the same author, how original!) that basically spew the same nonsense, but there is no indication why Microsoft can't do exactly what they are doing.

      • Re: (Score:3, Interesting)

        by scoove ( 71173 )

        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, shoul

    • Re: (Score:3, Insightful)

      by Dahamma ( 304068 )

      Microsoft has already started moving/building data centers out of Washington state, which is both perfectly legal and bound to hurt the shortsighted WA state govt that thought it could just start changing tax laws on companies without any repercussions.

      I agree with a previous poster that trying to blame Microsoft (a company that is probably one of the biggest sources of economic growth in the Seattle metropolitan area) for their budget problems is idiotic. All companies by nature will look for ways to get

    • How much of Microsoft's software did the state of Washington write?

      There are plenty of places to do business where you don't have to pay a huge tribute to satisfy the greed of the local warlords. Some of them are even in the United States.

      The State of Washington should try being less greedy. They should do less and ask the dependent class to do more for themselves.

      As always, my first suggestion is for anyone on government housing assistance to be required to live with a roommate to share housing expenses.

      • 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.

    • Re: (Score:3, Insightful)

      You're absolutely right. Microsoft won't be going anywhere. They'll just continue laying off the residents of Washington state.

      Then by your logic, Washington state will raise taxes to pay those laid off employees to be unemployed, rather than Microsoft pay them to be productive.

      This is brilliant.

    • by jmorris42 ( 1458 ) * <{jmorris} {at} {beau.org}> on Tuesday September 22, 2009 @10:29PM (#29511297)

      > " Like hell they will. You think all those C-levels, VPs and billionaire executives will want to move?

      And I'm sure the locals said the same thing about Boeing as they happily taxed the crap out of them to fund their left coast utopia. Of course they did move their headquarters out of the state. And are building a big non-union plant down south.

      Microsoft doesn't have to just pick up it's ball and leave. Just keep building out facilities in multiple States and countries like they have been doing and play each of them against the other for the most favorable tax and regulatory treatement. If Washington gets too aggressive on this issue threaten to move the official headquarters. There ARE a lot of nice places just in the US and many are actually pretty nice to live in. The current location wasn't even the first one ya know.

      Even better leverage, especially in this crappy economy, is to just threaten to push all new hiring to more favorable business environments. I.e. threaten the politicians with a terrible press release about a new thousand headcount shop that won't be opening in the state because of the bad business climate. And if they think it is a bluff, do it and do it over until they either get a clue or the center of mass has actually moved to a better place and then really relocate the HQ.

      For a company like Microsoft where they are doesn't really matter much so long as it is the sort of place key personnel wouldn't be demoralized living in. They have no ties to a natural resource, no major transportation needs, etc.

  • by anonicon ( 215837 ) on Tuesday September 22, 2009 @09:13PM (#29510757)

    Well, I guess the Washington government could try to pass a law that taxes a company for a subsidiary whose primary location is in a tax-free zone. If it stood up to the inevitable legal challenge, I have no idea what the unintended consequences would be for the tax landscape.

    • by mabhatter654 ( 561290 ) on Tuesday September 22, 2009 @09:46PM (#29510983)

      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".

  • by Globally Mobile ( 1635415 ) on Tuesday September 22, 2009 @09:16PM (#29510787) Homepage Journal
    The author says at the end...

    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.

  • by JeffSh ( 71237 ) <jeffslashdot&m0m0,org> on Tuesday September 22, 2009 @09:18PM (#29510811)

    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/ [crosscut.com]
    which was posted to Slashdot back then
    http://slashdot.org/article.pl?sid=08/02/04/1520219 [slashdot.org]
    and a followup with his anti-arguments to the posts from Slashdot back then.
    http://www.idealog.us/2008/02/top-reader-excu.html [idealog.us]

    Oh and 2004 too:
    http://slashdot.org/article.pl?sid=04/10/01/2137228&tid=109 [slashdot.org]

    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.

  • by John Hasler ( 414242 ) on Tuesday September 22, 2009 @09:24PM (#29510851) Homepage

    ...why don't you just do so?

  • by curmudgeon99 ( 1040054 ) on Tuesday September 22, 2009 @09:26PM (#29510861)
    Here we have yet another example of the Evil coming out of Microsoft. The State of Washington and its taxpayers have spent a pretty bit of coin providing an educated workforce for Microsoft, by creating all the infrastructure such as the electric utilities, the roads, the police, fire and the rest. Without all of these public services, companies like Microsoft would be much, much less profitable.

    If these companies are so hell bent not to pay taxes--then why don't they move to Russia? When I lived there, zero taxes were taken from my pay. Companies paid hardly any taxes. Oh yeah, they had to pay the Russian Mafia because the tax-starved government had no power.

    So, we see the most anti-American behavior imaginable is some hugely wealthy company like Microsoft scamming the taxpayer. I hope that the state of Washington hits M$ for their entire back taxes. Microsoft could pay it out of petty cash.
  • by kenh ( 9056 ) on Tuesday September 22, 2009 @09:28PM (#29510879) Homepage Journal
    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?
    • Re: (Score:3, Interesting)

      by anagama ( 611277 )
      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.
  • by sakti ( 16411 ) on Tuesday September 22, 2009 @09:43PM (#29510963) Homepage

    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.

  • by dirkdodgers ( 1642627 ) on Tuesday September 22, 2009 @10:05PM (#29511097)

    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.

  • Use tax (Score:3, Interesting)

    by PPH ( 736903 ) on Tuesday September 22, 2009 @10:08PM (#29511123)

    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.

  • by AHuxley ( 892839 ) on Tuesday September 22, 2009 @10:12PM (#29511157) Journal
    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.
  • Comment removed (Score:4, Insightful)

    by account_deleted ( 4530225 ) on Tuesday September 22, 2009 @10:38PM (#29511363)
    Comment removed based on user account deletion
  • kdawson sucks (Score:5, Interesting)

    by timmarhy ( 659436 ) on Tuesday September 22, 2009 @11:10PM (#29511571)
    MS haven't broken any laws here, all that's happening is a policitan is trying to deflect attention from his poor management of the states fiances.

    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?

  • by newscloud ( 1037538 ) * on Wednesday September 23, 2009 @03:21AM (#29512689) Homepage
    Since a lot of commenters on my blog misunderstand Wa. State Tax Law, I've posted text of the statue there under Notes for commenters at the bottom. http://blog.reifman.org/2009/09/road-balanced-budget-leads-to-microsoft.html [reifman.org] * The law does not distinguish between license sales intrastate, interstate or international * By transferring it's software to Reno for sale from Nevada, Microsoft is accomplishing a "sleight of hand" which probably would not pass muster in Washington State court. I also addressed a lot of common arguments people make against Microsoft paying its taxes here - back in 2008: Top Reader Excuses for Microsoft's Tax Avoidance (Idealog) http://www.idealog.us/2008/02/top-reader-excu.html [idealog.us]

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