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