Sneaky Tax Tactics Save Apple Billions of Dollars

The NY Times is reporting that by routing huge amounts of income through low-tax places like Nevada, Ireland, Luxembourg, and the British Virgin Islands, Apple probably avoided paying $2.4 billion dollars in U.S. taxes last year alone. That's billion, with a B.

The concept is pretty simple: since digital goods are intangible (unlike refrigerators) they can easily be sold from anywhere. Apple is flush with digital goods, from software to music. So, instead of selling everything from California—where Apple is based, and where there's a 8.84 percent corporate tax rate—they sell it from somewhere where there's little to no tax, like, say Reno. The offices they set up in these locations are often not much bigger than a hole in the wall, because nothing reeeally needs to happen there. They just need an address, primarily.

Apple is far from the only tech company to do this, they've just brought it to a level of high art. The Times goes on to report that 71 technology companies in the Standard & Poor's 500-stock index pay one-third less in global taxes (on average) than most of the other S&P companies. It's a fascinating report, and one that might elicit some introspection regarding how our economy works. Apple is a publicly held company and has an obligation to its share-holders to be as profitable as possible. But Apple is also headquartered in a state (and a country) that could really use those extra tax revenues right now. I'm just saying, for all they money they're saving, their new MacBook Pros had better be awesome. [NY Times]