How Apple legally avoids billions in corporate taxes each year

Each year Apple -- an many, many other tech companies -- manages to avoid billions in corporate taxes around the world and across the U.S. They do this by setting up offices and funneling money to tax-friendly places like Ireland and Reno, Nevada. Even though Apple's corporate headquarters is in Cupertino, California, having offices to collect profits and invest money in countries and state with little or no corporate tax, they legally hang on to vast amounts of profit each year.

The New York Times, in another one of their Apple headlined exposés, points out that Apple's office in Reno, Nevada, only consists of a handful of employees. Nevada's corporate tax rate is 0%. California's is 8.33%. You can see where the savings add up rather quickly. And this office is one of many that Apple has established across the globe in order to legally cut back on taxes owed.


A treasury economist, Martin A. Sullivan, estimated that if Apple wouldn't have used tactics such as these, their tax bill last year alone would have been around $2.4 billion higher. Apple paid around $3.3 billion in taxes on a reported $34.2 billion last year.

Apple has responded to the New York Times' assertions that Apple evades taxes:



Although it's not made obvious in the New York Times article, Apple isn't the only company that takes advantage of tax code in this way. Most tax code was written with tangible goods in mind and most tech companies also deal with digital goods and transactions. It's very easy for companies such as Apple, Google, Microsoft, and other tech giants to collect the profits from these sales in low or no tax states and countries. In comparison, a company like Walmart that makes most of their revenue by selling tangible items would have a harder time using some of the same. Walmart recently paid $5.9 billion in taxes on $24.4 billion in revenue.

Although tech companies are lobbying heavily against it, and seeking enormous tax breaks before they repatriate their income, it's probably only a matter of time before tax codes are revised to better reflect the way in which the digital economy nows operates and does business. Until then, Apple and other tech companies alike will probably continue to enjoy the benefits of outdated tax code.

Source: New York Times