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Microsoft Freeloading In Washington State Courts

kdawson posted more than 4 years ago | from the having-it-both-ways dept.

Microsoft 395

reifman writes "For tax purposes, Microsoft reports that it's earned its estimated $143 billion in software licensing revenue in Nevada, where there is no licensing tax, as we discussed a few weeks ago. However, for legal purposes, Microsoft relies on Washington law and its underfunded courts to defend its contracts as it did in Microsoft Licensing GP vs. TSR Silicon. Application of common legal doctrines such as nexus, the step doctrine, and alter ego theory may lead to findings that Microsoft owes the state more than $1 billion in taxes, interest, and penalties."

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What a Troll! (0, Troll)

Syncerus (213609) | more than 4 years ago | (#29871673)

Do you go out of your way to find the way in which you can legally give the government the most possible tax revenue?

It is absurd to suggest that any public company not do the maximum they can to minimize their tax liability. You obviously have an ax to grind with MS, and that's fine, but digging up this kind of garbage is ridiculous. The same statements that you have made about MS can probably be made about 95% of the Fortune 500.

Re:What a Troll! (2, Funny)

OzPeter (195038) | more than 4 years ago | (#29871703)

Now now .. don't let common sense get in the way of a first post rant

Re:What a Troll! (5, Insightful)

mikelieman (35628) | more than 4 years ago | (#29871711)

It's not that anyone cares that MSFT booked the revenue in Nevada.

BUT, That means the Laws of Nevada are dominant, not Washington. Microsoft needed to make one choice, but they seem to want the best of both worlds.

Re:What a Troll! (4, Insightful)

DoofusOfDeath (636671) | more than 4 years ago | (#29871923)

It's not that anyone cares that MSFT booked the revenue in Nevada.

Really? I'll best most people in Washington (state) do.

Re:What a Troll! (5, Insightful)

NoYob (1630681) | more than 4 years ago | (#29871993)

It's not that anyone cares that MSFT booked the revenue in Nevada.

BUT, That means the Laws of Nevada are dominant, not Washington. Microsoft needed to make one choice, but they seem to want the best of both worlds.

I know. Unfortunately, a law passed in 2004 [worldlawdirect.com] bars companies from going offshore to get around the most Byzantine tax system in the World that we have here in the US. Does it cross anyone's mind to change our tax system? Nope. We just keep piling shit on shit, causing this jockeying.

Hate MS all you want, but what they're doing is nothing.

Re:What a Troll! (5, Insightful)

rtfa-troll (1340807) | more than 4 years ago | (#29872291)

The tax system should be pretty simple. Whenever you earn money you pay a percentage to the government. The reason it is so complex almost everywhere is precisely because companies like Microsoft lobby to get little exceptions. Look at the percentage mentioned in this article. 1Billion in 143Billion? You try to find a civilised place (where anybody sane wants to live; I'm looking at you Bridge to Nowhere Land) where you can pay 0.6% tax.

Why do you think Nevada has such strange taxes? Because they want to attract companies like Microsoft who only do anything at all there because of this. Large amounts of the "intellectual property" "economy" are basically a tax dodge to shift earnings from places where people do work to offshore companies which own trademarks. Again; who's lobbying for "intellectual property" protection and why?

Re:What a Troll! (0)

Anonymous Coward | more than 4 years ago | (#29872457)

1Billion in 143Billion? You try to find a civilised place (where anybody sane wants to live; I'm looking at you Bridge to Nowhere Land) where you can pay 0.6% tax.

That is 1 Billion in licensing taxes, not 1 Billion in total taxes. Microsoft has reported an average tax rate of 26% for 2008.

It's simple for Washington (1)

MikeRT (947531) | more than 4 years ago | (#29872407)

BUT, That means the Laws of Nevada are dominant, not Washington. Microsoft needed to make one choice, but they seem to want the best of both worlds.

Change their accounting and tax laws and this "problem" will go away! On the other hand, one of the downsides of having a federal system with 50 semi-independent states is you have competition. Washington might not like them, but Montana or Idaho might be more than willing to let Microsoft set up shop with nary a peep said ill of their practices.

Of course, the up side to having that competition is that you have the ability to move to a state that is governed to your liking instead of having to stew in bitter resentment as a one-size-fits-all policy is forced on you.

Re:What a Troll! (1, Interesting)

Binestar (28861) | more than 4 years ago | (#29871717)

Taxes are a necessary evil in society. We can debate individual taxes all you want, but your blanket statement of giving the government the most possible tax money is off base. If Microsoft were paying this 775M+ in taxes they are avoiding with a loophole that is 775M less in taxes that need to be assessed elsewhere.

Re:What a Troll! (5, Insightful)

140Mandak262Jamuna (970587) | more than 4 years ago | (#29871811)

Long time ago in another era, when the government cut taxes, the companies invested the savings in America, it lead to job growth, economic growth and increased tax revenues down the line. It made sense to cut taxes then. Dem JFK cut capital gains taxes. Rep Reagan cut top marginal rates. But that was then and it is now. Since 1984 FDI Foreign Direct Investment flowing into Taiwan, Korea, China, Phillipines, Singapore etc amounted to trillions of dollars. Now a days if US government cuts taxes, the corporations use the savings to build factories in China. So the old argument tax-will-foster-economic growth does not cut it anymore.

Further there is no down side to moving HQ offshore, to avoid taxes. Becoming a Panama flag flying ship or any such thing. When Somali pirates pirate ships, it is the US Navy that does the rescue even if the ship is registered in Panama. When there is no down side all the corporations will just go where the taxes are low.

Now that we have brain washed most Americans to vicereally hate taxes, whether it makes sense or not, the corporations have no down side at all. And we wonder why there are 40 million Americans without healthcare, why our infrastructure is crumbling and why there is no real wage growth in USA.

Re:What a Troll! (0)

Anonymous Coward | more than 4 years ago | (#29871879)

Corrolation != Causation.

Re:What a Troll! (5, Insightful)

Dan Ost (415913) | more than 4 years ago | (#29872591)

There are a couple of phrases that are pet peeves of mine because people throw them around without really understanding them.

"Correlation does not imply causation" is, strictly speaking, true, but is often used to refute an argument rather than point out a possible questionable premise of an argument (if you don't understand the difference, don't use this phrase). Correlation by itself does not imply causation, but if the correlation is not a statistical anomaly, it implies either (a) causation or (b) common cause. Therefore it does not refute the argument so much as it says that "maybe the conclusion is wrong, but I can't say for sure without further information".

My other pet peeve phrase is "Absence of evidence is not evidence of absence" which is misleading at best. A more correct statement would be "Absence of evidence before reasonable investigation is not evidence of absence". Once a reasonable search for evidence has been made, especially if said evidence should be reasonably detectable by currently available methods, then an absence of evidence IS evidence of absence.

I've given up being peeved by "begs the question". People are going to use that phrase wrong and no amount of education will help this.

Re:What a Troll! (1)

Jurily (900488) | more than 4 years ago | (#29872157)

Now a days if US government cuts taxes, the corporations use the savings to build factories in China. So the old argument tax-will-foster-economic growth does not cut it anymore.

Tell me again, how much tax do they have to pay in China? Oh right, they're just moving across the globe to save on shipping costs.

Re:What a Troll! (5, Insightful)

140Mandak262Jamuna (970587) | more than 4 years ago | (#29872197)

Well, you make profits here in America? Pay taxes in America. Take the factories anywhere you want. But pay tariff when you bring your goodies here.

Re:What a Troll! (1)

Jurily (900488) | more than 4 years ago | (#29872347)

Well, you make profits here in America? Pay taxes in America. Take the factories anywhere you want. But pay tariff when you bring your goodies here.

Yeah, let's have a strong opinion on corporations vs. the government! I mean, it's not you who has to buy more expensive goods if the taxes are high, is it?

And you know the government spends all the taxes on roads and hospitals!

Re:What a Troll! (1)

guruevi (827432) | more than 4 years ago | (#29872433)

Yep, many countries levy taxes at the borders (up to 80% of retail value - if they catch you) for stuff (electronics etc.) that you buy outside the country and bring in because it's cheaper elsewhere. I think that only holds for individuals though.

Re:What a Troll! (1)

tmalone (534172) | more than 4 years ago | (#29872417)

No, but they do move to save on labor costs (including worker safety), environmental regulations, and consumer product regulations. Or maybe you're right, it's all about the taxes.

Re:What a Troll! (1)

Ixitar (153040) | more than 4 years ago | (#29872461)

When I was working in Asia, I had to make sure that I spent less that 6 months in China. If I spent more than 6 months in China in a calendar year, then I would be assessed 40% income tax.

It's not taxes that push them out of the US (3, Interesting)

MikeRT (947531) | more than 4 years ago | (#29872523)

Now a days if US government cuts taxes, the corporations use the savings to build factories in China. So the old argument tax-will-foster-economic growth does not cut it anymore.

In the last 20-25 years, the US has become far less business-friendly than it once was. A lot more regulations, an increasingly litigious society coupled with a legal code that is often vague, more expectations on benefits, etc.

It also doesn't help things that the expectations of the American people haven't changed. My boss' cousin works for Honda as an assembly line worker. He makes a fair wage; the UAW guys practically down the street from their plant expect a few times that pay and benefits for the same job which puts their combined income at a level higher than most of the senior software engineers I work with! They act like it's still 1950 and the American car manufacturers face no serious competition from cheaper, more reasonable Japanese and Korean labor and products.

Re:What a Troll! (2, Interesting)

ElectricTurtle (1171201) | more than 4 years ago | (#29872549)

The Bush tax cuts increased tax revenue through increasing the volume of assets flowing through the economy as well, and they must have had some positive effect on domestic jobs to keep unemployment around 4-5% all those years.

Manufacturing isn't the only game in town, though it might be more profitable if unions didn't stand in the way of more automation. Thankfully a relatively free market has kept us from trying too desperately to remain in a market space where we are simply no longer competitive. Ironically, the first wave of Asian industrial manufacturing growth is now transitioning to the next wave of cheaper manufacturing in places like India. Of course they're whinging about it in an almost American fashion. Economies simply have to adapt. If you try to hold on to old modes artificially through things like protectionism, the tariffs simply make the cost of living for the whole population higher.

However I do agree that the US armed forces need to stop policing the world. If anything, foreign governments should be defraying the costs if we're to protect their shipping as well as ours. I would support closing most overseas bases and using carrier groups as the primary means of worldwide force projection. And we also need to stop dumping billions of dollars in 'aid' to nations all over the globe. My tax dollars shouldn't be flowing directly into corrupt dictators pockets.

The taxed always hate taxes if they're sane. You do realize that the American War of Independence was in many ways a tax revolt right? This country was born hating taxes. Thankfully it does too, or we'd probably be tossing even more of our product down the government toilet.

Re:What a Troll! (2, Insightful)

rohan972 (880586) | more than 4 years ago | (#29871899)

If Microsoft were paying this 775M+ in taxes they are avoiding with a loophole that is 775M less in taxes that need to be assessed elsewhere.

You will never be able to find a tax reduction you can attribute to the government collecting this. That's not how it works, it just means the government is taking more. That doesn't mean I think the government should tolerate tax evasion. It will make MS a little less profitable/competitive, because they either have to absorb the higher tax from their profits or raise their prices/sales.

Re:What a Troll! (2, Insightful)

Binestar (28861) | more than 4 years ago | (#29872015)

You will never be able to find a tax reduction you can attribute to the government collecting this. That's not how it works, it just means the government is taking more. That doesn't mean I think the government should tolerate tax evasion. It will make MS a little less profitable/competitive, because they either have to absorb the higher tax from their profits or raise their prices/sales.

The negative to this unfortunately unprovable. 775M might mean that the parking costs for using the state parks did not go up by $2/car, or that a school grant program was not reduced in funding, or that school funding was increased instead of holding steady. Just because taxes were not reduced does not mean it won't have an effect.

Re:What a Troll! (0)

Anonymous Coward | more than 4 years ago | (#29872171)

But if I never visits state park in WA, why should I pay more in MS software (or anything else) just so the people who does visit can save couple of dollars in parking? If we take this to an extreme, why doesn't the government taxes us 100% so we can all have free food, free housing, free entertainment, free transportation, etc.?

Re:What a Troll! (1)

m.ducharme (1082683) | more than 4 years ago | (#29872451)

Well, why shouldn't we?

/devil's advocate

flame-retardant underpants/

Democracy is made of compromises (0)

Anonymous Coward | more than 4 years ago | (#29872485)

why doesn't the government taxes us 100% so we can all have free food, free housing, free entertainment, free transportation, etc.?

There are quite a few of us who wouldn't mind such a system. Or at least higher taxes for better services. Then there are people (like you, I assume) who do mind such. Government makes a compromise between the groups by taxing a part but not all of your profits. If you don't like the compromise made in your country, you can move to a country with government that is closer to your idealogies. If such a country is willing to accept you as a citizen, of course.

Re:What a Troll! (0, Redundant)

cgenman (325138) | more than 4 years ago | (#29872443)

You will never be able to find a tax reduction you can attribute to the government collecting this. That's not how it works, it just means the government is taking more. That doesn't mean I think the government should tolerate tax evasion. It will make MS a little less profitable/competitive, because they either have to absorb the higher tax from their profits or raise their prices/sales.

Seeing as how most government organizations are operating in the red due to the cashpocalypse, the "tax reduction" from collecting this would come in the form of fewer emergency bond measures that we will be saddled with paying back ten years down the road.

Re:What a Troll! (1)

jedidiah (1196) | more than 4 years ago | (#29872671)

...except there aren't any emergency bond measures because the financial sector isn't willing to lend money to good borrowers anymore.

Local governments might start having to "pay cash" as it were...

Re:What a Troll! (2, Interesting)

HazelMotes (568300) | more than 4 years ago | (#29872363)

Maybe, but probably not. I would expect any government (Washington State or otherwise) that started receiving $775M+ in additional tax revenue would *spend* it, not cut taxes for others. Anyway, isn't there a difference between tax avoidance and tax evasion? I would imagine, given the size of the target, if M$ was evading taxes they would be brought to bear as quickly as the courts would allow.

Re:What a Troll! (1)

pandaman9000 (520981) | more than 4 years ago | (#29871727)

......... And I see THAT as the real problem. Perhaps it is a boon to have a company with Microsoft's massive resources point out the many flaws in the current interstate/international systems. I'm glad this article came out, because I am sure that Microsoft is only a part of the billions in tax dollars we can recoup by fixing this type of "exploit".

The article brings it up, and your post helps get the proper mindset. Good for both!

Re:What a Troll! (5, Insightful)

viking099 (70446) | more than 4 years ago | (#29871767)

I don't have an axe to grind with Microsoft, and I like and use many of their products every day.

That said, I hope they do get nailed to the wall. The Slashdot community often rails against patent trolls venue shopping for their stupid lawsuits, because it's the best chance for a settlement in their favor.

Microsoft is doing nothing different; venue shopping to lessen their tax liability. It's dishonest, immoral, and it should be stopped. If Nevada is such a nice place to operate, then maybe they should have more of their operations there. As it stand, any corporation in the US could open a branch office there, then report whatever in that state, and whatever funds their actual home state would have received vanish.

This looks like a pretty transparent shell game, and I hope the regulators take steps to make sure it won't happen again.

Re:What a Troll! (2, Interesting)

maxume (22995) | more than 4 years ago | (#29872007)

Do note that the companies opening the offices in Nevada need to make sure they have good accountants. I'm fairly certain Microsoft is following the letter of the law (or, at least, coming very very close), not just making shit up and paying taxes on the fabrications.

(I'm not saying I think it is a great thing they are doing, just that you are painting a simplified picture, there has to be some reason that they are able to recognize the revenues in Nevada, and I bet the reason is present in Washington state law, and it isn't particularly likely that companies engaged in more material businesses would be able to easily follow along)

Re:What a Troll! (2, Informative)

jmauro (32523) | more than 4 years ago | (#29872691)

I'll make it easy, the reason it's done is the entire tax burden for a corp registering it's revenues solely in Nevada is total tax on them regardless of how many or how little revenue there is is exactly $200. The reason in Washington Law your looking for is that the tax burden will be greater than $200.

It's simply a play to avoid taxes in Washington State while still taking advantage of the services Washington State offers.

Well that and Nevada doesn't have an information sharing agreement with the IRS so they're completely out of the loop on how much tax you actual owe based on your revenues. It helps on avoiding Federal taxes as well.

Re:What a Troll! (5, Interesting)

Attila Dimedici (1036002) | more than 4 years ago | (#29872217)

The problem isn't MS choosing to report their income from software licensing in Nevada (where they pay no tax on it) instead of Washington (where it would be taxed). The problem is suing a New York state company over licensing issues in Washington state while reporting the income from licensing in Nevada. If Microsoft runs their software licensing business out of Nevada (as their tax reporting claims), then the appropriate venue for suing a New York state based company over licensing issues is either New York or Nevada. Is it legal? Apparently. Is it ethical? No.

Re:What a Troll! (1)

kiwimate (458274) | more than 4 years ago | (#29872319)

Well, personally, I hope the first companies to get nailed to the wall (who arguably really are doing something dishonest and immoral and which should be stopped, if you believe in this logic) are those like Accenture (headquartered in Dublin, previously Bermuda), Global Crossing (HQ: Bermuda) and Seagate (HQ: Cayman Islands).

With Microsoft, you're bickering over which state gets which benefits. At least it's still going to the U.S.

And, as was pointed out in the previous story referenced in the summary, it's not much different from the firms who register in Delaware (banks, lots of, for example) for reasons of "tax simplicity".

Is it all good and holy and pure? Maybe not in the idealogue viewpoint...but there are a lot of companies out there doing much, much worse.

Of course...they're not the evil Microsoft. Any other kdawson story would filled with vitriolic complaints about the nonsense he posts.

Did you see the story icon? (2, Funny)

Bananatree3 (872975) | more than 4 years ago | (#29871791)

You obviously have an ax to grind with MS

Did you see the Borg icon next to the story? Anything less than scathing villinization of the MacroHard Collective is blasphemy!

Re:What a Troll! (0, Offtopic)

Sara953 (1664703) | more than 4 years ago | (#29871819)

That Mr. Bill Gates deserves praise and appreciation
http://www.bent-palestine.com/ [bent-palestine.com]

Re:What a Troll! (5, Insightful)

noundi (1044080) | more than 4 years ago | (#29871831)

Do you go out of your way to find the way in which you can legally give the government the most possible tax revenue?

It is absurd to suggest that any public company not do the maximum they can to minimize their tax liability. You obviously have an ax to grind with MS, and that's fine, but digging up this kind of garbage is ridiculous. The same statements that you have made about MS can probably be made about 95% of the Fortune 500.

I think the point here was that the system is broken. Not that MS takes advantage of it.

Re:What a Troll! (0)

Anonymous Coward | more than 4 years ago | (#29872699)

Well to be fair the article was posted by kdawson so the point probably is that Microsoft is evil.

Re:What a Troll! (4, Informative)

Penguinisto (415985) | more than 4 years ago | (#29871869)

"Do you go out of your way to find the way in which you can legally give the government the most possible tax revenue?"

Fair enough - but if that's the case, then let Microsoft lodge its licensing lawsuits and etc. in Nevada as well... where the laws are not as strongly in its favor.

Incidentally, my employer's corp headquarters is in the EU. Can I therefore claim the first $95k of my income as tax-exempt because it was earned "overseas", taking advantage of a wee tax loophole in spite of living in the US? Of course not - I'm not a corporation, so I have to claim the income as being earned right here in the US.

Re:What a Troll! (-1, Troll)

Anonymous Coward | more than 4 years ago | (#29872051)

Don't be mad because they are taking advantage of a few loopholes that you won't bring yourself to use.

Re:What a Troll! (0)

Anonymous Coward | more than 4 years ago | (#29872395)

What? As a citizen this IS something to be mad about. Not the fact that they take advantage of it, but that the system in the country which you reside in is broken. You're a part of that system, you depend on that system for many things, and if someone gets off the hook then everybody is not equal in that system. Thus you have a problem. You reason like a child.

Re:What a Troll! (4, Funny)

nedlohs (1335013) | more than 4 years ago | (#29872505)

Yeah great example. You'd rather pay taxes on that first $95k in that famously low tax haven known as Europe...

Re:What a Troll! (-1, Troll)

MrKaos (858439) | more than 4 years ago | (#29872103)

The same statements that you have made about MS can probably be made about 95% of the Fortune 500.

Multiple Sclerosis [wikipedia.org] is a serious disease and most orgainisations that support MS sufferers are probably tax exempt. Fortune 500 aren't though so it is fair enough that they pay tax. It makes no sense to compare a disease (MS) with a Fortune 500 company.

Microsoft has an accepted two letter moniker of a uppercase 'M' followed by a '$'. I'd suggest that you use that or type 'Microsoft' to avoid any future confusion. I think it's rather offensive to attempt to use the moniker 'MS' for Microsoft just to sate the Microsoft 'fanboi' attitude - after all Microsoft have taken enough things from the community. I type 'Microsoft' despite the existence of the accepted two letter moniker 'M$'. It's fairly vapid for Microsoft's fanatical supporters to trample some minority groups ability to be recognised because they are too lazy to type Microsoft.

Re:What a Troll! (1)

dissy (172727) | more than 4 years ago | (#29872195)

Multiple Sclerosis [wikipedia.org] is a serious disease and most orgainisations that support MS sufferers are probably tax exempt.

In a technical/computer context, MS never ever means Multiple Sclerosis. Multiple Sclerosis means Multiple Sclerosis. MS means Microsoft.

Unless you want to swap your geek card for your doctor card and move over to slashmed.md :P

Re:What a Troll! (1)

petermgreen (876956) | more than 4 years ago | (#29872377)

Microsoft has an accepted two letter moniker of a uppercase 'M' followed by a '$'
Really? A lot of /. trolls use it but I don't think i've ever seen it outside that context.

Most short acronyms have different meanings in different contexts. Heck according to wikipedia ms has two different meanings even within the medical field.

Re:What a Troll! (2, Informative)

Flowstone (1638793) | more than 4 years ago | (#29872273)

Last time i checked, the government takes a nice big chunk out of my bread and butter. which is what microsoft is essentially avoiding, and then turning around and having the laws of a state they barely pay taxes to protect the assets they never sold in that state to begin with.

Re:What a Troll! (0)

Anonymous Coward | more than 4 years ago | (#29872283)

Where is the story of Jobs taking his pay in cheaper taxed Capital Gains rather than in regular income?
Hev /.ers even heard of Apple?

Re:What a Troll! (1)

sumdumass (711423) | more than 4 years ago | (#29872315)

Not to mention this is why taxing corporations is a bad thing. They will A: look to be obligated with the least taxes and rightfully so, and B: just pass the costs onto the consumer who actually pays the taxes.

As for using the courts in Washington state, The owner and founder of MS is a legal resident of Washington as long as MS being located there and employing a crap load of other people who for all intents and purposes are Washington state citizens paying taxes and they deserve the legal protection of the state regardless of how much money he or his companies or any of the employees make somewhere else. This is not to mention that the losers of lawsuits generally pay courts costs so it isn't really like the state is out of much in the end anyways.

Re:What a Troll! (1)

nedlohs (1335013) | more than 4 years ago | (#29872469)

The author's argument is that they aren't doing it legally. Given the author isn't a lawyer or an accountant and Microsoft employs a bunch of them to make sure they dot the i's and cross the t's, large amounts of salt are in order.

Re:What a Troll! (4, Insightful)

Ephemeriis (315124) | more than 4 years ago | (#29872643)

Do you go out of your way to find the way in which you can legally give the government the most possible tax revenue?

No... I don't make much money, and I've got a couple dependents... So I'm not really trying very hard to pay more than they ask me to... But I also don't put much time and effort into paying less than they ask me to either. I know most people try to find as many loopholes and deductions as they can, which is maybe what you're aiming for... But I don't think most people report their income in an entirely different state to avoid paying taxes.

It is absurd to suggest that any public company not do the maximum they can to minimize their tax liability.

Ehhh... I guess it is true that a public company's first responsibility is to maximize the investment of its stockholders... Which minimizing tax liability will help accomplish... But you really think it is absurd to be surprised that a company would go this far?

The court system is funded by tax dollars. Microsoft uses the court system in Washington. But they don't like the prices that Washington courts charge (their taxes) so they decide to pay the courts in Nevada instead. Fine, maybe you can find enough loopholes and technicalities to make that legal... But how does that make sense?

You know, I like Apple's OS upgrade pricing much better than Microsoft's... When I upgrade to Windows 7 I'm going to pay Apple instead.

You obviously have an ax to grind with MS, and that's fine, but digging up this kind of garbage is ridiculous.

I don't personally have an axe to grind with Microsoft. I use their products every day and am reasonably happy with them. They get the job done, at least. And their products keep me employed. So, no, no axe to grind.

The same statements that you have made about MS can probably be made about 95% of the Fortune 500.

And if your friends jumped off a bridge, would you jump too?

Since when is everybody else does it an acceptable argument?

The problem is that the system is being abused - not that Microsoft is committing the abuse. Of course if Fisher Price were dodging taxes we probably wouldn't see the story here on Slashdot, but that wouldn't make it a non-story or an ok thing to do.

Re:What a Troll! (4, Insightful)

Mr. Slippery (47854) | more than 4 years ago | (#29872655)

It is absurd to suggest that any public company not do the maximum they can to minimize their tax liability.

It is absurd to suggest that any public company should be permitted to evade the law.

The same statements that you have made about MS can probably be made about 95% of the Fortune 500.

So? One criminal at a time.

Re:What a Troll! (4, Insightful)

Bob9113 (14996) | more than 4 years ago | (#29872661)

It is absurd to suggest that any public company not do the maximum they can to minimize their tax liability.

It is absurd to suggest that I, the alternative taxpayer, should not castigate them leaving the tax burden to me. If we're all just rationally self-interested parties, then I should be doing everything I can to get Microsoft to pay as much of the tax burden as possible, for exactly the same reasons that you assert that they should attempt to shift the burden onto me.

$1billion (1)

Thanshin (1188877) | more than 4 years ago | (#29871677)

I wonder how much of an impact would be, for MS, to pay that amount.

I also wonder how much did they expect this to happen but did it anyway, just in case it works.

Re:$1billion (1)

Thanshin (1188877) | more than 4 years ago | (#29871713)

Trying to reply myself, in case someone is interested:

MS Annual report [microsoft.com]

Re:$1billion (-1)

Anonymous Coward | more than 4 years ago | (#29871733)

It's not going to happen. In case anyone has forgotten, they just got the state to agree to put up half the money for a multi-million dollar pedestrian bridge in their campus. Microsoft has serious clout in that neck of the woods.

If it did, I bet the first thing Ballmer would do would be to open a satellite campus in suburban Portland, and shift a few thousand employees over there as a shot across the bow.

Re:$1billion (2, Interesting)

pandaman9000 (520981) | more than 4 years ago | (#29871875)

Good point. Which brings up the legal sensibility of a related issue: States being able to give giant tax breaks to companies as an incentive to exist there. I can see some underhanded deals making state congressmen richer, while giving out "good buddy" tax breaks to certain companies as incentive to keep lining their pockets. Perhaps i'm oversimplifying it, but I am not comfortable with how these arrangements could be abused. This is a bit off topic from leveraging differences in state regulations, but seems part of the same overall game.

Re:$1billion (1)

maxume (22995) | more than 4 years ago | (#29872045)

So don't move to states where you think the people tolerate corrupt politicians.

Or something.

Re:$1billion (0)

Anonymous Coward | more than 4 years ago | (#29872611)

So don't move to states where you think the people tolerate corrupt politicians.
Translation: "Suicide is your only option."

Re:$1billion (1)

Penguinisto (415985) | more than 4 years ago | (#29871895)

...all it would take is for a sharp judge in Washington State to tell Microsoft: "sorry - not our jurisdiction. Go to Vegas or Reno to get it taken care of".

So... (0)

Anonymous Coward | more than 4 years ago | (#29871683)

So, they have a tax free ride, while all along I have to pay taxes for everything?...how convenient for them.
It could be interesting to have all the corporations based in the US pay taxes, not the huge and outrageous taxes customary in the US, but something like a flat rate 12.5% like they do in Ireland, it would generate more income for the state and impulse the economy.

Re:So... (1)

pandaman9000 (520981) | more than 4 years ago | (#29871761)

Agreed. The current system is intended to give breaks where there are legitimat shortfalls. It falls short of working in the intended way.

Will not matter. (4, Interesting)

LWATCDR (28044) | more than 4 years ago | (#29871731)

How much revenue does Washington State get from Microsoft? Not just in direct taxes but on all the taxes that the employees pay? Odds are that one billion is a drop in the bucket and Washington state will not risk ticking off Microsoft.
Microsoft is a money pump for Washington State. How many billions of dollars a year does it bring into the state from other states and even countries?
Not that I say it is right but Washington State will not go after Microsoft for this because it just isn't worth the effort or the risk.

Re:Will not matter. (2, Interesting)

pandaman9000 (520981) | more than 4 years ago | (#29871945)

I think that if you dig deeper there are a lot of free rides being given to Microsoft. The money, except for taxes, is being brought in to -Microsoft-. Washington is probably no taxing them, and may even be subsidizing their property costs. Microsoft employees may live in Washington, or they may also claim residence elsewhere. So, if all the facts are brought ot light, I wonder just how much Washington is really making off of Microsoft. I don't wonder in an active fashion, like actually finding out. Too much to dig up, and sift through. I wonder, aloud, like the old guy on the porch, who has a pretty good guess in mind just how it is working out.

Too big to fail, and to big to pay taxes seems to be pretty popular, even as H1Bs and offshoring dry up any local benefits.
Just my opin. YMMV.

Re:Will not matter. (4, Informative)

Penguinisto (415985) | more than 4 years ago | (#29871983)

How much revenue does Washington State get from Microsoft? Not just in direct taxes but on all the taxes that the employees pay?

Washington has no state personal income tax, so it may not be as big as you surmise.

/P (who lives next door, in Oregon, where folks ask the sames things vis-a-vis Intel).

Re:Will not matter. (3, Insightful)

LWATCDR (28044) | more than 4 years ago | (#29872109)

They buy stuff in Washington so they pay sales tax. They buy homes in Washington so they pay property taxes.
They buy stuff so people have jobs selling stuff and those people buy more stuff paying sales and property taxes....
If a state doesn't have personal income tax then they make the money from sales and property taxes. a lack of a personal income tax doesn't mean tax free.
Then you have the other companies that are in Washington because Microsoft was there. If Microsoft pulled out of Washington it would cost the state a lot more than that one billion dollars in additional taxes they may or may not manage to get from Microsoft.

Re:Will not matter. (1)

Richard_at_work (517087) | more than 4 years ago | (#29872275)

The indirect benefits of a large employer within the state was precisely the basis behind Washington States pandering to Boeing to bring the original 787 production line into the state:
  • Business and Occupation tax - reduced from 0.484% to 0.2904% of gross revenues
  • Exempted tooling and machinery from taxation
  • Increased the lower rate of tax for Boeings suppliers

All of which will cost Washington State in the order of $3.4billion over 20 years, and has cost them $278million between 2003 and 2008.

So maybe the state should stfu about one company acting within the law, albeit a law that was considered perfectly acceptable up until the state spent its way into a hole, while simultaneously dilberately reducing taxation on another company specifically in order to increase employment.

Oh, and Washington State doesn't get to tax Boeing on sales either - their headquarters are in Chicago....

Re:Will not matter. (1)

weeb0 (741451) | more than 4 years ago | (#29872055)

I think it's question of being a good corporate citizen. MS receive a lot of federal funds, they should pay what they have to pay. Us, as citizen we have to pay our taxes dans we cannot decide in which state we will pay our taxes and decide in which state they offer the best social advantage ( if any )...

Re:Will not matter. (0)

Anonymous Coward | more than 4 years ago | (#29872187)

Um, you can choose which state you live in if you want. You have the freedom to move between any of the 50 states. About the only places you can't choose to live of your own free will is places like Indian reservations.

So yeah, I guess the Navajo Nation is off-limits, but that's ok, there's plenty of choices in the rest of Arizona, Utah, and New Mexico.

Seriously, if you had the money for it to be worthwhile, you'd be paying somebody 50-60 thousand dollars (or more) to decide how to pay your taxes just like Microsoft does. But for most folks, we don't even need to go down to H&R Block.

And heck, I violate my state's sales tax all the time. A trip to Georgia can save me a lot of money on some purchases.

Re:Will not matter. (1)

LWATCDR (28044) | more than 4 years ago | (#29872201)

What??????
These are state taxes we are talking about. Frankly I question if that tax is legal at all based on the interstate commerce clause in the US constitution. This isn't a federal tax at all.

Re:Will not matter. (1)

earnest murderer (888716) | more than 4 years ago | (#29872139)

I wouldn't say it "pumps billions", but it does keep a lot of educated people employed. Microsoft can pickup and leave for anywhere. I suppose our legislators figure it's better they stay here at least contributing something than leaving.

I do not agree with this necessarily, but if it's a choice between being cheated but still coming out ahead or loosing it all...

There are much bigger questions regarding corporations that need to be resolved at a national level before Washington can really do anything productive about the situation. Since corporations are more or less running the country that's not likely to happen.

Re:Will not matter. (1)

scamper_22 (1073470) | more than 4 years ago | (#29872683)

One of the many reasons I say, we get rid of the corporate tax.

It is just plain stupid. Corporations do not make money. People do.

Rich CEOs and investors make money... and they are taxed.
Workers make money and they are taxed.
Suppliers make money and they are taxed.

The corporate tax is a needless abstraction imply you are taxing a corporation, but not taxing people.
EVIL CORPORATION is the mantra. It is silly politics and especially bad reality.
Hint, Microsoft employs tens of thousands of employees.
Hint, when you tax Microsoft, you are hurting their income and bonuses.

Me, I'd say get rid of the corporate tax and increase taxes on rich people.
Also, increase the liability of individuals in the company. We need to lessen treatment the corporation as an individual. It is not. Though for some purposes it is hard to treat it any other way. If a corporation ever commits a crime... I want the person responsible for the crime.

WON'T SOMEONE THINK OF THE SHAREHOLDERS !! (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#29871739)

Won't you?

Soquitcherwhininbitch !!

They pay some (4, Informative)

deathguppie (768263) | more than 4 years ago | (#29871781)

I live here in Seattle, and this has been discussed in the newspapers before. Actually Microsoft does sell software here in Washington, just not very much. However, I think the state is just as happy to have all the high paying jobs. Technically Boeing is the largest single employer here in Seattle and they have sold planes out of Delaware for many years. It's nothing new.

Washington state has sales tax in place of income tax in other states. Currently it is 6.5% state wide, with an added 2.5% here in King county. So MS, Boeing, Motorola, Adobe, etc. all have sales outlets outside the state.

Re:They pay some (0)

Anonymous Coward | more than 4 years ago | (#29872403)

Except nearly every state has a sales AND income tax...here in Illinois it's an income tax coupled with a variable sales tax - in the CBD of chicago you pay 12-13% sales tax.

Better than canada. (3, Interesting)

yourassOA (1546173) | more than 4 years ago | (#29871795)

Over half of what I earn goes to the government in taxes. Most of which get wasted so industry doesn't have to pay to expand their infastructure. OT but for example my power bill just went up to pay for new transmission lines to the states. But the people in the states can buy power produced an hr away from me for half the price I pay.

Linux Users Freeloading Off Their Parents (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#29871809)

Move out of the fucking basement and start paying rent, THEN you'll be permitted to bitch about Microsoft's freeloading.

Very Fair (1)

omb (759389) | more than 4 years ago | (#29871821)

And it couldn't happen to a nicer guy!

Buy your MS licenses in China (4, Interesting)

Toe, The (545098) | more than 4 years ago | (#29871841)

So then Microsoft would have no problem with me buying my MS licenses in China and using them in the US, right?

Yeah, riiiiiight.

Re:Buy your MS licenses in China (3, Insightful)

DavMz (1652411) | more than 4 years ago | (#29871971)

If you don't mind having your OS in Chinese, I am sure it is ok.

Re:Buy your MS licenses in China (2, Insightful)

DoofusOfDeath (636671) | more than 4 years ago | (#29871977)

So then Microsoft would have no problem with me buying my MS licenses in China and using them in the US, right?

Yeah, riiiiiight.

Contract law and tax law strike me as very different kinds of things. Microsoft is capitalizing on its (possible) freedoms afforded under tax law. You're suggesting that the arguments carry over into contract law (and possibly copyright law). I think you need to do more work to establish that that's reasonable.

Re:Buy your MS licenses in China (0)

Anonymous Coward | more than 4 years ago | (#29872083)

OTOH, a friend in Germany just bought a Apple Care subscription from the US just because it was much cheaper in the US.

Everybody minimizes their expenses.

And every jurisdiction tries to game the system to take advantage. I laugh at the uproar when a company just closes the plant and repays the big tax break they had been given for the politically attractive promise to create jobs. As if you'd expect corporations to operate with anything but their self interest in mind. If they didn't, the stock holders would be firing the executives.

No matter if it is a sales tax, a VAT, or income tax...the money still has to be raised somehow to pay for the services the citizens demand.

hell (-1, Offtopic)

Anonymous Coward | more than 4 years ago | (#29871955)

burn bitches burn in a hell

You've gotta love this entitlement mentality (2, Insightful)

schwit1 (797399) | more than 4 years ago | (#29871975)

If Washingtonians don't like it they can change the laws. Then watch as MS moves jobs overseas or to other states.

.
I have a mutual fund that includes MS stock and I expect them to use all legal means possible to reduce their expenses. One way is to minimize taxes.

I would also point out that MS does not really pay taxes. This is just another expense that gets passed to the consumer.

Re:You've gotta love this entitlement mentality (0, Troll)

smoker2 (750216) | more than 4 years ago | (#29872143)

I would also point out that MS does not really pay taxes. This is just another expense that gets passed to the consumer.

Idiot.

MS - lets put our tax burden onto the price
Customer - Oh the cost has gone up.
MS -oh, now we are paying more tax because the product costs more, let's put the burden on the consumer.
Customer - Oh prices have gone up again.
MS -oh our taxes have gone up again, let's put it on the consumer.
Customer - oh, the prices have gone up again.
MS - every time we put the price up to pay for taxes, we get taxed more - my brain hurts. Maybe if we understood how taxes worked ...

Re:You've gotta love this entitlement mentality (0)

Anonymous Coward | more than 4 years ago | (#29872551)

I would also point out that MS does not really pay taxes. This is just another expense that gets passed to the consumer.

Idiot.

Really?

How does Microsoft pay for anything? Could it be from the revenues from the sales of products... And who pays for the products.. The consumers.

I understand logical thinking is hard for you so I'll put this simple:

All businesses pass along all expenses to the consumers of their products. Either in the price of the product or service, or as a direct line item (think telephones passing on government taxes as line items on the bill).

The expense of manufacture, the expense of employees, the rent on the building, the taxes; all get passed on in the price of the product/service.

Re:You've gotta love this entitlement mentality (1)

Richard_at_work (517087) | more than 4 years ago | (#29872631)

Where the hell do you think the money comes from to pay the corporate taxes? The tooth fairy? Of course it comes from the consumer, and of course prices will rise to accomodate them.

Re:You've gotta love this entitlement mentality (0)

Anonymous Coward | more than 4 years ago | (#29872689)

I suspect you are the idiot. MIcrosoft's revenue comes from customers buying their products and licensing their software. Therefore ALL expenses, including employee salaries, advertising, free meals to employees and taxes necessarily are paid for by customers.

Corporations don't pay taxes, not news (2, Interesting)

GodfatherofSoul (174979) | more than 4 years ago | (#29872053)

I think it was during their anti-monopoly case that it came out they hadn't paid taxes in something like 3 of 4 years.

And patent trolls... (1)

Marthisdil (606679) | more than 4 years ago | (#29872057)

Open suites in the Eastern District of Texas, regardless of where they are based.. Anyways...I digress...

Do away with income taxes (corporate and personal) (0)

Anonymous Coward | more than 4 years ago | (#29872081)

This is why we need to do away with income taxes, and use only a point-of-sale tax like the FairTac (http://FairTax.org)

This is news? (0, Redundant)

TwistedGreen (80055) | more than 4 years ago | (#29872105)

So what? This is what tax lawyers DO. Any competent company would do this, and I don't see anything wrong with it.

Michael J. Fox? (2, Funny)

DavMz (1652411) | more than 4 years ago | (#29872123)

Why does the name of Michael J. Fox appears at the top of the contract [scribd.com] ?

UK (4, Interesting)

BlueBoxSW.com (745855) | more than 4 years ago | (#29872125)

Was reading an article from the BBC on corporations in the UK claiming other countries as their headquarters to save tax dollars.

Evidently if you do this in the UK, they check see that the heads of the company are ACTUALLY operating in that country.

Why don't we do that here in the US? It seems like a fair standard to me.

What's their HQ address? (0)

Anonymous Coward | more than 4 years ago | (#29872215)

Is it Nevada? No? Though luck. Pay up suckers.

uh...no (3, Insightful)

buddyglass (925859) | more than 4 years ago | (#29872481)

Application of common legal doctrines such as nexus, the step doctrine, and alter ego theory may lead to findings that Microsoft owes the state more than $1 billion in taxes, interest, and penalties.

Microsoft doesn't owe Washington jack crap, because what's it's doing with this Nevada thing is entirely legal. If Washington wants a piece of the pie then they need to change their state law to prohibit this practice by entities incorporated in Washington.

Legal doctrines? (4, Funny)

Hatta (162192) | more than 4 years ago | (#29872507)

Application of common legal doctrines such as nexus, the step doctrine, and alter ego theory

Those don't sound like legal doctrines. They sound like sci-fi movie titles.

Wrong on the law (2)

Taylor123456789 (1354177) | more than 4 years ago | (#29872581)

Trial courts are based at the county level, not the state level. Counties get their revenues from property taxes and sales taxes within their borders, not state income tax. It is wrong to say that Microsoft is avoiding paying the same taxes that fund the courts.

Also, each of the doctrines mentioned in the article has a specific usage. They don't stand alone as a cause of action (lawsuit). The author of the original article is not a lawyer. As they say, "a little knowledge is a dangerous thing".

It's nice to complain, but what about the law.. (0)

Anonymous Coward | more than 4 years ago | (#29872583)

I feel obligated to explain that the tests for personal and subject matter jurisdiction of a court are different than the ones for where a business is "located" for tax purposes or corporate charter purposes. First off, nearly all US corporations are based in Delaware for numerous reasons - one of them being their well developed corporate law jurisprudence (the Delaware chancellory courts are widely accepted as being among the best in the country). Second, companies cannot just file lawsuits anywhere they feel like. They have to get personal jurisdiction of the court over the defendant - say you have a contract dispute with a company in Pennsylvania over a deal you made in Florida, but you live in South Carolina. If the company you are suing has no place of business in SC and doesn't do substantial business there, you cannot just go to the SC courts and sue them. You can file a lawsuit in Pennsylvania or (probably - depending on the state long arm statute) Florida. You may also be able to file suit in another state if the contract says that disputes will be resolved by the courts of X state (depending again on the long arm statute). Any other state that these 3 (including your home state of South Carolina), and the court will almost certainly grant the company's motion to dismiss for lack of personal jurisdiction.

Microsoft, being a big company with lots of negotiating power, probably had a choice of law provisions put into these contracts putting them into Washington state courts. Alternatively, these companies that the lawsuits are with could have had their own primary offices in Washington state - meaning that that's where jurisdiction can attach. They can't just willy-nilly ask for a change of venue to Nevada just because that's where Microsoft is "based" for tax purposes. The only way for Microsoft to get into court in Nevada is for them to sue a defendant located in Nevada, a Nevada choice of law provision to be inserted into the contract, or for SOMEONE TO FILE SUIT AGAINST THEM IN NEVADA - presuming that their tax residency there is sufficient under Nevada's long arm statute.

Oh and if somehow a corporation that is truly not a "citizen" of Washington got hauled into court there by Microsoft, any lawyer would file to have the case removed to federal court, then probably for a transfer of venue to a district court nearer to the dispute or defendant. This is of course provided that Microsoft and the corporation are completely diverse (no commonalities of state citizenship) and the dollar amount in dispute is over $75,000.

Astroturfing (2, Informative)

Anonymous Coward | more than 4 years ago | (#29872651)

-= According to Wikipedia =-

Astroturfing is an English-language euphemism referring to political, advertising, or public relations campaigns that are formally planned by an organization, but designed to mask its origins to create the impression of being spontaneous, popular "grassroots" behavior. The term refers to AstroTurf, a brand of synthetic carpeting designed to look like natural grass.

Thus, submitting a story to your own blog is probably Astroturfing.

Taxation is a Game (2, Insightful)

Anonymous Coward | more than 4 years ago | (#29872659)

Good for them. This is what they pay their lawyers and bean counters for. If they weren't working the system like this I would be disappointed.
All businesses and individuals should reduce their tax burden any way they can. If uncle sugar didn't want it to happen he would change the rules.

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