Apple Skirting Taxes

Story first appeared in The Detroit Free Press.

A published report says Apple Inc. uses subsidiaries in Ireland, the Netherlands and other low-tax nations as part of a strategy that enables the technology giant to cut its global tax bill by billions of dollars every year.

The New York Times on Sunday outlined legal methods used by Cupertino, California-based Apple to avoid paying billions of dollars in federal and state taxes.

One approach highlighted in the report: Even though the company is based in California, Apple has set up a small office in Reno, Nevada, to collect and invest its profits. The corporate tax rate in Nevada is zero. In California, it's 8.84%.

While many major corporations try to reduce their tax bills, technology companies like Apple, Google Inc., Microsoft Corp. and others have more options to do so, according to Sacramento Tax Lawyers.

That's because some of their revenue comes from digital products or royalties on patents, which makes it easier for them to move profits to tax-friendly states or countries.

In contrast, it's tougher to shift the collection of profits from the sale of a physical product — like groceries or a car — to a tax-friendly haven.

The 71 technology companies in the S&P 500, including Apple, Google, Yahoo Inc. and Dell Inc., reported paying global cash taxes over the past two years at a rate that's, on average, one-third less than other S&P 500 companies, the Times said.

Apple has legally allocated about 70% of its profits overseas, where tax rates are often much lower than in the U.S., according to company filings.

The Times cites a study by a former Treasury Department economist that estimates Apple's federal tax bill would have been $2.4 billion higher last year without such tactics.

The newspaper says Apple paid $3.3 billion in cash taxes globally on $34.2 billion in profits last year. That's a tax rate of 9.8%.

In a statement, Apple told the Times that it has complied with all laws and accounting rules, and says that its U.S. operations generated nearly $5 billion in federal and state income taxes in the first half of fiscal 2012.


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Sprint Accused of Tax Fraud in NY State

Story first appeared in the Los Angeles Times.

Sprint Nextel Corp. is being sued for $300 million by the New York Attorney General, who is accusing the wireless carrier of tax fraud.

The suit alleges, based on a whistle-blower’s tip, that Sprint underpaid sales tax on some of its wireless plans for the last seven years – a “groundbreaking” filing.

The complaint alleges that Sprint’s debt to New York is growing by $210,000 a week. The NY Attorney General claims the company already owes more than $100 million. Under the state’s False Claims Act, Sprint could be forced to pay out three times that in penalties. New York Taxation Lawyers are following the case.

The legislation also could require a quarter of any future settlement to go to the as yet unnamed whistle-blower, whose March 2011 suit against Sprint sparked the attorney general’s investigation.

Sprint, in a statement, said the government’s suit is without merit and that it categorically denies the complaint’s allegations.

Spring maintains that they have collected and paid over to New York every penny of sales taxes on mobile wireless services that they believe the customers owe under New York state law.

Sprint’s argument is that New York should only tax calls on its flat-rate plans that originate and end within the state. The Attorney General said that the company is on the hook for the full amount of its monthly charges, and mentioned that Sprint’s competitors – including Verizon, AT&T and T-Mobile – all have complied.

But since 2005, Sprint has repeatedly and knowingly submitted false records and statements to tax authorities and concealed this practice from taxing authorities, its competitors, and its customers, the attorney general’s office alleges.

The complaint claims that Sprint’s alleged tax dodging was an effort to obtain an advantage over its competitors by positioning its calling plans as cheaper options.

Tax dodging is not acceptable and every tool in the arsenal will be used to make sure that taxpayers’ money is protected, and that honest businesses and consumers are not placed at a disadvantage for collecting and paying their fair share of taxes.


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