updated 03:30 pm EDT, Wed September 23, 2009
Microsoft has saved $707m in taxes over 13 years?
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. The software giant is based in Redmond, Washington, but it records its software licensing revenue from an office in Reno, Nevada. 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.
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. In 2009, Microsoft should have paid more than $87 million in Washington state software royalty taxes, with $90 million in 2008. This is based on the lower 0.484 percent tax, but it would have been 1.5 percent before 1998.
Microsoft employs software engineers in Redmond and Issaquah, both in Washington state, where they create software such as Windows Vista, Windows Server, SQL Server, and Office. Sales of these products are made from a License and Operations office in Reno, Nevada, where there is no corporate income tax.
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. [via Guardian]