“Microsoft is being accused of finding a loophole that has thus far saved it from paying some $707 million in software licensing taxes, according to a blog entry from Seattle-based technologist and writer Jeff Reifman,” Electronista reports.
“The software giant is based in Redmond, Washington, but it records its software licensing revenue from an office in Reno, Nevada,” Electronista reports. “Microsoft does this to save on taxes because of different laws in the two states, Reifman says, and so would have saved hundreds of millions of dollars over the past 13 years.”
Electronista reports, “The majority of its software development is performed in Washington State, Reifman says, but Microsoft records its estimated $18 billion in licensing revenue per year through the Reno corporate office… While Microsoft is not technically breaking the law, Reifman and others like him believe the company is morally wrong in hurting its own state for the alleged discounts. Washington is currently operating on a $430 million deficit in its biennial budget, which is believed to be shortchanging residents in the state, including Microsoft’s own employees.”
Full article here.
MacDailyNews Take: Aw, come on, everybody knows Microsoft has no ethics or morals. Their flagship product is an upside-down and backwards knock-off of a superior competitor’s product, for crying out loud.
That said, the state of Washington should look into why corporations based there feel the need to establish offices in less confiscatory states. Besides the fact that the loophole exists in the first place, that’s the actual root of the issue. You think Microsoft or any corporation or its shareholders are going to authorize paying hundreds of millions in taxes that they do not legally have to pay out of the goodness of their hearts? If so, welcome to Fantasy Island. If you don’t like it, work to close the loophole(s). Obviously, while this practice might be legal, it doesn’t sound like it should be; tens of thousands of employees doing all the work, but a relative handful claiming the income in a tax-free state? Who paid for that loophole?
Here’s another thing to consider: Microsoft’s tens of thousands of Washington State employees are presumably paying sales taxes, gas taxes, tolls, and many other taxes out their wazoos that benefit the state of Washington immensely. How much is all of that worth? Jeff Reifman should write a blog entry about what would happen to the state of Washington if Microsoft moved all of their offices to Nevada.
707 million? that’s couch change for Bill.
I hope Washington state loves to pay for infrastructure support for MS while in its gratitude to the state and the taxpayers of the state, MS gives it their thanks but not their cash.
Ballmer needs it to support his ventures in Zuneland.
707 mill ? ..
Ballmer must need the money for more chairs !
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If I, as an individual, were to reside in 2 different states, I believe that I am responsible for paying taxes in the state that I reside the longest in. Perhaps corporations should be required to do the same. They should determine where that corporation is mainly based by looking at headcounts. The largest headcount for Microshit is in Washington State, so they should have to pay their taxes there.
b-b-b-b-but giving huge companies tax breaks is g-g-g-g-good for our economy! THIS IS GOOD NEWS!
“…..b-b-b-b-but giving huge companies tax breaks is g-g-g-g-good for our economy! THIS IS GOOD NEWS!……”
Yeah.. right ..
How do ya think Ballmer got ..His Raise .. .. (while M$ tanked about 17% )
How many talented Microsoft designers will move their families from Seattle to Reno?
Microsoft should pay its taxes, and if not, its executives should go to jail just like what would happen to you or me if we didn’t pay our taxes.
Why Reno? Is there something wrong with moving to India or maybe some other 3rd world country? If the Fed and my state of NJ don’t stop taking what is not their, I may have to leave too.
Why do you think Apple is setting up that billion server farm in NC? Better local food? Wanted to be in the Bible belt now? California is sinking in their laws and taxes. No one should stay until the idiots are kicked out of office.
Thanks for yet another libertarian rant, MDN. It’s getting really tiresome. I thought this was a site for Apple/Mac news, not a soapbox for your political beliefs, but I guess I was wrong.
The loopholes were made for corporations by our friendly representatives who were bought and paid for by corporations — it’s the capitalist way!
And please don’t confuse ethical, moral, and legal — those are entirely different concepts. M$ skirts the fringe of legality (when not stepping over the line), but they never worry about ethics unless it adversely affects revenue.
@ Buster
We do not love this. =(
Come on folks – the argument about where they are selling licenses from and how much MicroSnot is/should be paying is all for the stupid masses. Companies do not, never have, and never will pay taxes. They serve as a tax collector for the government to quietly get taxes from ignorant people who do not see through this scam. The cost of doing business – salaries, capital expenses, energy, taxes, EVERYTHING is built into the price of the product/service and the taxes are passed on. If you think businesses pay taxes then you should go burn your voter registration card right now because you are too dumb to participate in the process.
This is the business version of registering one’s yacht in Delaware. It’s an obvious tax-dodge, and an obvious loophole that should be closed.
Damn I may move to Vegas for sure now! Cha Ching!
What? The paragon of ethical fairness & purity? Impossible, I say…Impossible!!
(…getting popcorn, propping up feet to watch what happens next…)
At least they kept it in the U.S. and didn’t go offshore.
Besides, the money saved was well spent on developing the Zune HD and that booklet thingy. Innovation like this can’t be achieved without huge monetary investments. Wake up and smell the coffee MDN.
Hey, I’m not a M$ fan but I am not opposed to taking advantage of the rules they did not write. Who wants to pay more taxes???? I don’t see people lining up to do so. Just people looking for handouts!!!!
If Microsoft moved all their offices to Nevada it would only be a matter of days before employees got their salary by pulling a lever.
I don’t say this very often so take heed young ones. When credit is due, give it.
Good job Microsoft, that is $707 million that you didn’t have to tack onto the price tag of your crappy product. If Warshington tries to ding you for this pack up the rest of HQ and truck it all down Hwy 95 into Reno. If you did that now you might be able to match Apples current OS price of $169 for Snow Leopard, iLife and iWork.
In terms of taxes, if it’s not technically illegal, then it’s ok in my book. There’s plenty of other things to criticise MS about; I’d hate to complain about any company that’s trying to pay the least amount of tax it can get away with legally.
How many MS employees would trade Seattle for Reno? Not the smart ones, if there are any.
As a die hard republican, I have faith that Ballmer will pass on these millions on his own accord to the middle class. HAVE FAITH.
While not a fan of MS I have to say this is not news. Tons of companies incorporate this way to avoid taxes and it’s legal. What should be up for debate is whether Washington state should pay for anything for MS’ campus with taxpayer money if they are going to skirt taxes this way. Since it is legal to pay taxes this way then fine, but the state should not be funding anything on that campus in Redmond.