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Apple Uses Office Locations to Minimize Tax Burden, NYT Reports

Apple Inc. uses offices in states other than California, where it’s headquartered, and countries outside the U.S. to help minimize its overall tax burden, the New York Times reported.

The company has an office in Reno, Nevada, to collect and invest its profits and avoid paying California’s 8.84 percent corporate tax rate on some of its gains, the newspaper said. Nevada’s tax rate is zero, the Times said. The method, which is legal, is one of many that enables the iPad and iPhone maker to reduce its tax bill by billions of dollars each year, the newspaper said in a story published today.

Former Treasury Department economist Martin Sullivan estimates Apple paid cash taxes of $3.3 billion worldwide on posted profit of $34.2 billion last year, and would have paid $2.4 billion more in U.S. taxes without the arrangement it has, the newspaper said.

Technology companies, due to a tax code skewed to an industrial age and not a digital one, are among the least-taxed businesses in the U.S., the Times said, citing government and corporate data.

Bloomberg News reported in October 2010 that Google Inc. cut its taxes by $3.1 billion in the three years prior using strategies known as the “Double Irish” and “Dutch Sandwich,” reducing its tax rate internationally to 2.4 percent.

Apple told the Times it “pays an enormous amount of taxes, which help our local, state and federal governments.” The company said its U.S. operations generated about $5 billion in federal and state income taxes in the first half of fiscal 2012, the newspaper reported.

The company also has subsidiaries in Luxembourg, Ireland and the British Virgin Islands that allow it to pay lower taxes on royalties or processed transactions, the newspaper said, citing former Apple executives. Apple declined to comment on its operations in Nevada or the other countries.

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