Microsoft’s state, local income tax bill is lowest in 15 years

The Redmond company’s U.S. state and local income-tax bill of $30 million in its just-completed fiscal year is the smallest since it started reporting the figures in 2003.

Microsoft said it expects to pay $30 million in U.S. state and local income taxes for its just-completed fiscal year, the smallest annual bill since the company started reporting the figure in 2003.

A year ago, Microsoft’s state and local income-tax payments totaled $136 million, and in the last 14 years the payments averaged $214 million. Tax payments to Washington state are not included in these figures because it has no state income tax.

The latest disclosure, in Microsoft’s annual report on Wednesday, comes as big U.S. corporations’ tax bills draw more political scrutiny.

A Microsoft spokesman said the decline in 2017 was caused by the company’s deferring taxes on some income to future years and the winding down of the company’s smartphone business.

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Forty-four states and the District of Columbia levy corporate income taxes, according to the Tax Policy Center think tank. For out-of-state corporations, most governments aim to tax the portion of a firm’s income generated by activities in their state.

Washington state directly taxes corporations primarily through its business and occupation (B&O) tax levied on the value of products sold.

Microsoft’s $30 million in state and local tax payments doesn’t include the B&O tax, a company spokesman said. The company records that bill as a component of operating expenses, and doesn’t break out the payment amount.

Microsoft, which has its headquarters in Redmond, said in a statement that it paid “significantly more” Washington state B&O tax in 2017 than the prior year, without providing figures.

The company minimizes its tax bill in part by routing sales through its Reno, Nevada, software-licensing office. Nevada doesn’t tax business income.

Microsoft’s latest regulatory filing also shows the fruits of the company’s effort to avoid U.S. federal income taxes. The company’s overseas income, untaxed in the U.S., rose to a record $142 billion as of June 30, up 15 percent from a year earlier.

U.S. corporate income tax on foreign earnings isn’t triggered if companies deem such money “permanently reinvested” abroad.

The cash pile underscores the stakes for the Redmond company should the Trump administration…

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