Apple Tax Strategy Cheats California Communities

Apple Mouse

I didn’t pay much attention to how Apple avoids paying billions of dollars in taxes through perfectly legal tax strategies all over the world. Not a big deal. Many Fortune 500 companies do whatever they can to avoid paying corporate taxes. Then I heard that Apple had set up a small office in Reno, Nevada, to funnel their profits through to avoid paying Califronia’s 8.84 percent corporate tax as Nevada doesn’t have a corporate tax. I started seeing red—and it wasn’t an apple.

Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.

California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.

Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.

If you ever considered incorporating your business in California, the Nevada corporate tax avoidance strategy is frequently mentioned in business incorporation books. Given the choice between paying 8.84 percent versus zero percent for a corporate tax rate, most individual business owners will go for zero percent. That particular tax strategy is useful if you can easily cross the state line from living in California to working in Nevada (i.e., the Lake Tahoe area). For many California businesses located far from the Nevada state line, this isn’t a viable tax strategy.

For many multinational corporations like Apple, skipping state and international lines to avoid paying corporate taxes that deprive communities of much needed tax revenues for services, infrastructure and schools is a matter of routine business.

You will often see this line on many Apple products: “Designed by Apple in California.”

I think Apple needs to decide to whether or not if they—the business managers that run the corporation as I don’t consider corporations to be people—are a California company. If so, they should pay California corporate taxes. If they want to avoid paying California corporate taxes, they should relocate their headquarters to Nevada—or Texas.

 

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