In 1997, Microsoft opened a small office in Reno, Nevada to record its software licensing revenue, about a third of its business, thereby avoiding Washington State’s .484 percent wholesale tax on software licensing royalties.
Since then, I estimate Microsoft has earned $127 billion in profit from $460 billion in revenue avoiding the payment of $728.8 million in taxes.
Using the Department of Revenue's historical interest tables (pdf), Microsoft's unpaid tax bill would total $995 million. Add on the typical 25 percent penalty that the Department of Revenue assesses on late tax and the amount would exceed $1.24 billion.
Table of Microsoft's Historical Revenue, Licensing Revenue and Unpaid Taxes
* All values are in the millions of dollars
* Microsoft stopped reporting its share of revenue from licensing in 2003, so I’ve continued to track it using a historical average from previous years of 31 percent.
* The table does not include interest or penalties that might be assessed. The Department of Revenue tells me they usually apply a 25 percent penalty for late taxes.
* In 1997, the royalty tax was 1.5%. Under pressure from software industry lobbyists, it was cut by more than 66% to .484 percent by the Legislature in 1998.
* Because some of Microsoft's international software is partially created and finished outside of Washington, it's possible that some portion of these licensing revenues would not be subject to our state's software royalty tax.
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