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Microsoft Foregoes Tax Break for the Greater Good

 Microsoft willing to forego tax breaks for the greater good.

Microsoft will no longer be eligible for the Washington State Manufacturer’s Machinery & Equipment Sales and Use Tax Exemption Program, beginning August 1, 2015.

The company let it be known in March that it was willing to pay more state taxes. According to Brad Smith, general counsel for Microsoft, “We’re comfortable getting less than we used to. [O]f course, if our taxes are going up, we would really like the money spent well, which from our perspective would mean actually investing in education and transportation but doing it with a strong sense of accountability.”

Spending the money well is, at least in theory, part of the budget deal reached by Washington State lawmakers and signed by Governor Jay Inslee (D). Although Microsoft is not mentioned by name, the budget eliminates a tax break for “an ineligible person,” defined as an affiliated group of two or more entities if all of the following apply:

  • “At least one member of the affiliated group was registered with the department to do business in Washington State on or before July 1, 1981;
  • As of the effective date of this section, the combined employment in this state of the affiliated group exceeds forty thousand full-time and part-time employees, based on data reported to the employment security by the affiliated group; and
  • The business activities of the affiliated group primarily include development, sales, and licensing of computer software and services.”

Guess which business fits that description?

Other tax changes include the termination of a “preferential tax rate for royalty payments on patents, copyrights and other intangible property.” This is expected to impact Microsoft and other tech companies.

But it’s not all give and give. According to the Seattle Times, a new tax break “could benefit Microsoft as well as other companies that build or refurbish data centers.”

Read the full text of SB 6138, “Increasing state revenue through improved compliance methods and eliminating tax preferences for royalties and certain manufacturing equipment.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.