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Microsoft The Courts The Almighty Buck

Microsoft Freeloading In Washington State Courts 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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Microsoft Freeloading In Washington State Courts

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  • Re:What a Troll! (Score:2, Interesting)

    by Binestar ( 28861 ) * on Monday October 26, 2009 @09:47AM (#29871717) Homepage
    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.
  • Will not matter. (Score:5, Interesting)

    by LWATCDR ( 28044 ) on Monday October 26, 2009 @09:49AM (#29871731) Homepage Journal

    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.

  • Better than canada. (Score:1, Interesting)

    by yourassOA ( 1546173 ) on Monday October 26, 2009 @09:53AM (#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.
  • by Toe, The ( 545098 ) on Monday October 26, 2009 @09:57AM (#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:$1billion (Score:2, Interesting)

    by pandaman9000 ( 520981 ) on Monday October 26, 2009 @10:00AM (#29871875) Homepage

    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:Will not matter. (Score:2, Interesting)

    by pandaman9000 ( 520981 ) on Monday October 26, 2009 @10:07AM (#29871945) Homepage

    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:What a Troll! (Score:2, Interesting)

    by maxume ( 22995 ) on Monday October 26, 2009 @10:13AM (#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)

  • by GodfatherofSoul ( 174979 ) on Monday October 26, 2009 @10:17AM (#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.
  • UK (Score:5, Interesting)

    by ( 745855 ) on Monday October 26, 2009 @10:23AM (#29872125) Homepage

    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.

  • Re:What a Troll! (Score:5, Interesting)

    by Attila Dimedici ( 1036002 ) on Monday October 26, 2009 @10:29AM (#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! (Score:2, Interesting)

    by HazelMotes ( 568300 ) on Monday October 26, 2009 @10:41AM (#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.
  • by MikeRT ( 947531 ) on Monday October 26, 2009 @10:52AM (#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! (Score:3, Interesting)

    by ElectricTurtle ( 1171201 ) on Monday October 26, 2009 @10:54AM (#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:$1billion (Score:3, Interesting)

    by Rockoon ( 1252108 ) on Monday October 26, 2009 @12:09PM (#29873467)
    Also keep in mind the 'bait and switch' nature of this all.

    The State of Washington has had motive to allow Microsoft to do this for years and year, because it isn't like Microsoft generates zero tax revenue in Washington. Far from it, their payroll taxes must be a significant figure on the States revenue books.

    The last thing they want is for Microsoft to move out. They have been satisfied with their share of this pie for many years, not wanting to disrupt the status quo and risk a real restructuring of Microsoft elsewhere.

    But now they want to seize 1 billion dollars as a retroactive penalty, precisely when the state is in the most dire financial trouble its been in for decades? Please.

    They didnt see a problem with it last year, so fuck them. Its OK for them to change the law and nail Microsoft on future money, but its not OK for them to have been complicit all these years essentially changing the rules of the game retroactively.
  • Re:What a Troll! (Score:2, Interesting)

    by plague3106 ( 71849 ) on Monday October 26, 2009 @12:39PM (#29873793)

    Why do people argue this only about god? These same people are prefectly fine saying "the tooth fairy doesn't exist."

    Of course my argument is that since there is no evidence of a god, it doesn't make any sense to act like there is. God may or may not exist, but since we have no evidence, we should act like there isn't a god, because to do otherwise is pointless. (If we don't even have evidence a god exists, how can we possibly know what a god would want from us if one did exist?)

  • by 0xdeadbeef ( 28836 ) on Monday October 26, 2009 @12:52PM (#29873963) Homepage Journal

    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.

    Where the hell do you think the money comes from to pay income taxes? Santa Claus? Of course it comes from the employer, and of courses salaries will rise to accommodate them.

  • Re:Will not matter. (Score:3, Interesting)

    by RightSaidFred99 ( 874576 ) on Monday October 26, 2009 @01:39PM (#29874593)
    Amen. It's hard for me to think in a way that makes corporate taxes logical. Tax the money when it comes out of the corporation. Increase dividend and capital gains taxes. Institute taxes on asshole CEO's who use corporate assets like jets and travel money for personal use. Taxing corporations only appeals to dimwitted hippies and other assorted anti-corporatist dipshits.
  • Re:What a Troll! (Score:1, Interesting)

    by Anonymous Coward on Monday October 26, 2009 @02:11PM (#29875021)

    Yes we do....

    And what really ticked us off was Bill Gates (whilst still working there day to day) and Steve Balmer complaining at lectures in Seattle about the state of education in Washington and about not being able get good hires here in Seattle.

    Given how much they DON'T pay here in taxes and how that is 100's of times the budget shortfall is in all the greater Seattle area school districts, that did not sit well....You don't contribute the same as other companies locally and in fact go out of you way to do so, you forfeit the right to complain about the quality of services those taxes pay for.

    They have a LOT more Nevada corps than any other WA company - and that's on top of all the other benefits they get by threatening to leave

  • Re:What a Troll! (Score:3, Interesting)

    by Fulcrum of Evil ( 560260 ) on Monday October 26, 2009 @02:57PM (#29875603)

    I'm thinking of starting my own business, and I would love to pay less in taxes

    But you still want good roads and schools, right? If you want to have your tax locus in nevada, then move there. There are plenty of startups in seattle, so we don't need vultures like you skipping out on their obligations.

  • Re:What a Troll! (Score:3, Interesting)

    by Phantom of the Opera ( 1867 ) on Monday October 26, 2009 @05:04PM (#29877387) Homepage

    Really? Bonuses for individual employees that do great work are more important to you than the greater social good that is potentially created by a fair and balanced taxation system?

    Why, yes. While I recognize the need for a certain level of taxes (maintaining infrastructure, financial costs of the government's operation), I would much rather reward and retain individuals that are skilled and industrious workers than distribute that money as a free handout to everyone in the US.

    Right now, a lot of my money is being taken and given to some fabulously wealthy defence contractors for their thousand dollar toilet seats. I'd prefer that it go to something worthwhile that will improve the quality of life in this country, which would include a universal healthcare. There is a sweet spot between the government spending no money and the government spending some money. We spend too much on defence, not enough on health. Disclaimer - I think that welfare is implemented in a way that does more harm than good to the recipients.

    Remember, the money you made, you did not make and secure it on your own. You made it with the help of roads, public education (for you or your customers who can read your ads), the internet (how was that made?). It's protected with emergency services, the armed forces (yes, its necessary to a degree), and the FDIC.

Thus spake the master programmer: "When a program is being tested, it is too late to make design changes." -- Geoffrey James, "The Tao of Programming"