IncSmart Washington (Small Business and Startups) -
After the Senate investigation into Microsoft's taxes, they discovered how Puerto Rico allowed US companies to legally withhold paying taxes. They found Microsoft had shifted 47 percent of its American revenues to Puerto Rico in the form of payments for imported products. They moved profits from sales on the mainland through Puerto Rico subsidiaries. The Puerto Rican subsidiary are not subject to ordinary federal taxes. These subsidiaries are set up in Puerto Rico to pay minimal taxes. Puerto Rican subsidiary's are taxed at a rate of 1 percent. These structures were not designed to satisfy any specific manufacturing and business needs, but only to avoid paying American taxes.
Microsoft has also been criticized for routing software licensing revenue through Nevada to reduce its tax bill in Washington. By using states like Nevada, they have effectively refused to pay taxes in Washington. This is a strategy used by several corporations and entertainers that has saved them a great deal of money. But public opinion is turning against this practice. Residents want a change. Microsoft has now agreed to pay a $57 million tax bill. Microsoft has also been boosting its investment in education in the Seattle with a pledge of $40 million for the Global Innovation Exchange tech graduate school in Bellevue, and a commitment of $10 million gift for a new University of Washington computer science building.
By David Oliver
Starting a Business in Washington
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