Apple (APPL) Stock: If Apple Were a Person, How Much Would It Pay in Taxes?
Congress recently accused Apple of being one of the largest corporate tax dodgers in America.
So, PolicyMic asked, “What would Apple actually pay in federal taxes if it was an individual and not a corporation?” Without getting too technical, would you believe Apple would pay 60% of what they are estimating in their current SEC 10-K filing!
While the purely technical answer to that theoretical question is best left for CPAs, you might find the following surprising as once again Congress appears to be barking up the wrong tree. Comparing Apples to Apples — excuse the pun — if Apple was an American citizen filing a tax return, their Adjusted Gross Income immediately would decline from the $156 billion net sales submitted on their SEC 10-K form.
Table of Contents (Exported from Apples SEC 10-K filing Annual Report to Shareholders 2012)
Net Sales
The following table shows net sales by operating segment and net sales and unit sales by product during 2012, 2011, and 2010 (dollars in millions and units in thousands):
2012
Change
2011
Change
2010
Net Sales by Operating Segment:
Americas net sales
$
57,512
50
%
$
38,315
56
%
$
24,498
Europe net sales
36,323
31
%
27,778
49
%
18,692
Japan net sales
10,571
94
%
5,437
37
%
3,981
Asia-Pacific net sales
33,274
47
%
22,592
174
%
8,256
Retail net sales
18,828
33
%
14,127
44
%
9,798
Total net sales
$
156,508
45
%
$
108,249
66
%
$
65,225
Net Sales by Product:
Desktops (a)(i)
$
6,040
(6
)%
$
6,439
4
%
$
6,201
Portables (b)(i)
17,181
12
%
15,344
36
%
11,278
Total Mac net sales
23,221
7
%
21,783
25
%
17,479
iPod (c)(i)
5,615
(25
)%
7,453
(10
)%
8,274
Other music related products and services (d)
8,534
35
%
6,314
28
%
4,948
iPhone and related products and services (e)(i)
80,477
71
%
47,057
87
%
25,179
iPad and related products and services (f)(i)
32,424
59
%
20,358
311
%
4,958
Peripherals and other hardware (g)
2,778
19
%
2,330
28
%
1,814
Software, service and other sales (h)
3,459
17
%
2,954
15
%
2,573
Total net sales
$
156,508
45
%
$
108,249
66
%
$
65,225
Apple totalled more in “net sales” from Europe, Japan and Asia-Pacific operating segments than they did in American Sales. As such, if Apple were an individual and we are equating wages to sales, none of the sales earned outside of America would be included as taxable income United States income.
Dropping Apple’s consolidated “net sales” from $156 Billion to $75 billion. (For ease of review I’m ignoring splitting out retail net sales). Next we must look at Apples expenses to come up with their Adjusted Gross Income.
Table of Contents (Exported from Apples Shareholder Report to Shareholders f 2012)
Item 6.
Selected Financial Data
The information set forth below for the five years ended September 29, 2012, is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included in Part II, Item 8 of this Form 10-K to fully understand factors that may affect the comparability of the information presented below (in millions, except number of shares, which are reflected in thousands and per share amounts).
2012
2011
2010
2009
2008
Net sales
$
156,508
$
108,249
$
65,225
$
42,905
$
37,491
Net income
$
41,733
$
25,922
$
14,013
$
8,235
$
6,119
Earnings per share:
Basic
$
44.64
$
28.05
$
15.41
$
9.22
$
6.94
Diluted
$
44.15
$
27.68
$
15.15
$
9.08
$
6.78
Cash dividends declared per share (a)
$
2.65
$
0
$
0
$
0
$
0
Shares used in computing earnings per share:
Basic
934,818
924,258
909,461
893,016
881,592
Diluted
945,355
936,645
924,712
907,005
902,139
Total cash, cash equivalents and marketable securities
$
121,251
$
81,570
$
51,011
$
33,992
$
24,490
Total assets
$
176,064
$
116,371
$
75,183
$
47,501
$
36,171
Total long-term obligations (b)
$
16,664
$
10,100
$
5,531
$
3,502
$
1,745
Total liabilities
$
57,854
$
39,756
$
27,392
$
15,861
$
13,874
Total shareholders’ equity
$
118,210
$
76,615
$
47,791
$
31,640
$
22,297
(a)
The Company declared a dividend of $2.65 per share in the fourth quarter of 2012.
(b)
The Company did not have any long-term debt during the five years ended September 29, 2012. Long-term obligations exclude non-current deferred revenue.
Assuming the $105 bllion of expenses which reduced Net Salas from $156 billion in Apple’s 10-K filling to $41 billion of net income can be proportionally allocated drops Apple the person’s Adjusted Gross Income to $27 billion. Ignoring any other deductions but State and Local Taxes would net Apple the individual an Adjusted Gross Income with rounding $24 billion.
Thus Apple the person would end up owing $8.4 billion.
Now take a quick look at what Apple the corporation reported as its anticipated Tax liability.
Income Taxes (Exported from pages 28-29 of Annual Report to Shareholders.)
The Company records a tax provision for the anticipated tax consequences of the reported results of operations. The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Table of Contents (Exported from page 68 of Apples 2012 Annual Report to Shareholders.)
Note 5 – Income Taxes
The provision for income taxes for 2012, 2011, and 2010, consisted of the following (in millions):
2012
2011
2010
Federal:
Current
$
7,240
$
3,884
$
2,150
Deferred
5,018
2,998
1,676
12,258
6,882
3,826
State:
Current
1,182
