WA grants MSFT $1.5B tax amnesty, resorts to taxing dance-clubs to make up shortfall

Jeff Reifman sez,

After granting Microsoft amnesty on its $1.5 billion Nevada tax dodge, state tax collectors are aggressively targeting Seattle dance clubs and night clubs over an obscure 'opportunity to dance' tax. Auditors search the Internet to find out whether people dance at specific clubs. One clubowner reports an auditor told him: 'You have the opportunity to dance, and we verified it by 8 or 10 different references on Yelp.'

"My auditor came in with an obituary of a girl who committed suicide,"says another club owner. "When I argued that we aren't primarily a dance club -- we have 'No Dancing' signs up everywhere -- she flashed this obit that said the girl liked to dance at [our club].

The Legislature gave up $100 million annually to Microsoft so it can target the city's music scene to try to make up $880,000. The Century Ballroom, a popular dance club, is holding ongoing fundraisers to offset its $250,000 in back taxes. Dancers are effectively funding Microsoft's Nevada tax dodge.

Seattle Dance Clubs Fundraise to Pay Microsoft’s Tax Bill (Thanks, Jeff!)


    1.  They are!  I’ve seen them.  And because it’s now been said on the internet. . . it’s totally true!!!

    1. my classmate’s step-mother makes $75 every hour on the laptop. She has been laid off for 6 months but last month her payment was $15783 just working on the laptop for a few hours. Read more on  Jive8.c­om

    1. People like you not buying from Microsoft is the reason they need to tax dodge in the first place. Clearly, you’re part of the problem.

      1.  Damn skippy he is. Can I get a THANKS, OBAMA! That loonix stuff is made of socialism so I’ve heard!

        1. It’s worse than that. It’s got personal freedom and responsibility in it! Scary shit to most people who would rather be part of the collective where it’s “safe.”

  1. as a business-o-state whom do you tax?:  the corp/rich-guys, or the workers who the rich-guys pay a paltry amount?  if you tax the rich-guys they’ll pull stakes and move to a place that taxes them less (or not a all) and you’ll get no taxes.  if you tax the workers the rich guys might hang around a bit before leaving anyway (cf Boeing).  it’s two frogs trying to boil each other and the flies have already lost (“but the flies can vote! the flies can purchase other products!” well, maybe, unless the two frogs have together created monopolies and gerrymanderings)

    1. if you tax the rich-guys they’ll pull stakes and move to a place that taxes them less (or not a all) and you’ll get no taxes.

      That’s the rationale for this kind of giveaway but it’s not really supported by evidence. You’ll note that Silicon Valley and a disproportionately high percentage of America’s wealthy are in California (top state income tax level: 10.55%) whereas there are few billionaires in Wyoming (no state income tax).

      1. yep, that is the rationale and the fear.  with the Seattle media often reporting of industrial flight from the region (linky)  so huzzah for Silicon Valley!  but the fears, and the union busting, are real… real legislative fears.

          1. If you think all those companies are in California, you’d be surprised.  Many of them are Delaware corporations, or Nevada corporations, and a respectably large number are based in Ireland, because it has the lowest taxes in the EU.  Or they’re doing the Double Irish trick, optionally with a Dutch or Cayman sandwich.   And yes, many of the employees live in California, but a number of them officially live in Nevada and are just downhill on business trips, so their salary might get hit with California taxes but their investments don’t.

          2. Yes, and the Irish economy is doing just grand, isn’t it?  Oh, oops.  Maybe not such a good example after all.

        1. So, if companies that rely on others to pick up their tax burden are not allowed to do so, they will pick up stakes and we will be left not having to pick up their tax burden.  And this is a bad thing, how?

    2. Let them go then.
      It’s not like they’re paying taxes here any way.

      Either way all these ass hats will Limbaugh their way back any way when they realize just how shitty the rest of the world is.

    3. So you reduce the amount of taxes they pay in your state to zero in order to keep them from fleeing to another state?  That’s obviously where that logic leads.

    1. until I saw the receipt that said $9656, I have faith …that…my brother woz like actually taking home money in their spare time from their computer.. there sisters neighbour has been doing this 4 only sixteen months and a short time ago repayed the loans on there house and purchased a great Chevrolet. we looked here………. ZOO80.ℂom

    1. Remember the Microsoft floppy shuffle?  Around 1995, Office used to come on a hundred 1.44mb floppy disks.

  2. If you think Ruby`s story is incredible…, a month-back my friend’s brother basically actually earnt $7560 grafting a fourteen hour week from home and they’re neighbor’s mom`s neighbour has done this for four months and errned more than $7560 parttime from a laptop. applie the tips at this website.,………. ZOO80.ℂom

  3. The Century Ballrooms is one of the most important swing dance venues on the continent. Dancers from all over the world travel to Seattle to dance there. This dance tax is a real shameful thing.

  4. The idea of taxing the “opportunity to dance” has to be one of the dumbest things I have ever heard.

    The solution is clear: a religion based on the teachings of Kevin Bacon could open churches as tax exempt “opportunities to dance” where dancing could be treated as a religious observance (as it should be) rather than as a taxable luxury.

    1. @wysinwyg – the Seattle patriarch you want to talk to is Mark Driscoll: http://blog.seattlepi.com/thebigblog/2011/11/03/seattle-pastor-mark-driscoll-says-yoga-is-demonic/

    2. San Francisco also extorts money from bars and restaurants with the excuse that Dancing needs to be regulated (because dance halls used to be Dens of Vice and Iniquity, back during the Gold Rush.)  JWZ had some recent comments about police attempts to get him to provide routine surveillance cameras at DNA Lounge to enforce it.

      1. San Francisco wouldn’t have an economy if it weren’t for Dens of Vice and Iniquity.

  5. Some backstory for those not from WA:

    Voters continually put through a initiative (put forth by professional initiative maker named Tim Eyman) to make increasing taxes require a 2/3 supermajority, and since the republicans have just enough of our state congress, it will never get to that point. Meanwhile reducing taxes is still a simple 50/50 vote.

    So now the legislature is seeking to tax clubs based on a tax originally designated toward dance studios, since they can’t “raise” taxes but can enforce the ones on the books.

    The aforementioned initiative has been struck down though, so hopefully this kind of nonsense gets sorted out sooner rather than later.

    1. Ugh, Tim Eyman. I hate that guy. He puts out all these incredibly shortsighted initiatives designed to be wildly popular as long as nobody thinks about them too hard.

      He’s a media whore IMHO. And I wish he’d stop. The only initiative he’s proposed that I’ve agreed with was to try to get Lynnwood to remove their rapacious and craven red light cameras.

      I’m pretty sure they shortened the duration of the yellow lights after they put the cameras in.

  6. I have been following all these stories as they have been posted to Boing Boing and the entire thing is fueled by someone with no grasp of tax law whatsoever. Glad to see that hasn’t changed.  It is a shame that this is still getting space.

    Now taxing Dance? That sucks….that’s a whole other issue. But this Microsoft “Tax Dodge” I’ve explained the issues with that every time its come up. It is just sad.

      1.  Are they cool with me? Nope, I think them a load of bull. Can we legally prevent them? Possibly, but it could be difficult.

        Could I make an argument that not collecting taxes on those annoyingly  LEGAL offshore havens is amnesty?

        Not with an understanding of tax law and a straight face.

        I certainly can be bothered by something on an ethical level while pointing out all of the holes and fallacies in the articles about it.

    1. @boingboing-102f0bb6efb3a6128a3c750dd16729be:disqus , if you disagree with the legal concepts – do you agree there are ethical issues here: http://jeffreifman.com/2013/04/09/the-third-anniversary-of-washington-states-big-tax-gift-to-microsoft/?
      Do you understand that there are differing precedences on the interpetration of taxing intangible property? Please read:

      Then, tell me where you stand.

      1. Jeff, I certainly understand the differences. I’m a tax professional…it is how I make my living.

        Let me save some time by just pointing you right back to the comments section of the above Boing Boing Link from THREE YEARS AGO where this entire thing is broken down fairly succinctly and your arguments are addressed point by point. It saves the time of me having to do it a second time.

        Is it ethical? I tend to think not (though some would argue against taxes being ethical, so I’m sure a supporting viewpoint can be found), but it is also not, and has never been, what you have claimed it to be…for YEARS.

  7. I don’t live in WA, but the idea of a flash mob spontaneously dancing in one of MS’ parking lots tickles me.  “You didn’t have ‘No Dancing’ signs up… so we’re gonna tax ya.”

  8. Oregon recently did something similar for Nike. I haven’t read about where the other shoe is dropping yet but I’m sure it will drop eventually.

  9.  I certainly agree that there are ethical issues, but that has NOT been how this entire concept has been reported from the very beginning. Indeed, it fails to grasp the differences of tax avoidance (which is legal) and tax evasion (which is not).

    Nor is there any “amnesty”. I’m used to seeing such trumped up hype from the right when speaking of “death taxes” and the like. I’m unused to such hyperbole being brandished as real news.

    I’ve repeatedly read and picked apart the Microsoft Tax Dodge articles every time they’ve been posted to BoingBoign. Perhaps check the past links and reread the lengthy discussions?

    Ethical matters or not, Microsoft is within the law, and claiming that there is amnesty and people are paying taxes because of an amnesty that doesn’t exist is beyond dishonest. It is a flat out lie.

    1. Ceronomus, you haven’t included any links – please do so or describe why your legal position more clearly. 

      Are you also willing to reveal your identity rather than anonymously criticize my reporting?The Seattle Times, a fairly conservative paper, which makes Microsoft’s Brad Smith, one of its seven luminaries http://www.seattletimescompany.com/luminaries/prof_brad.html has chosen not to ever report on the enormous financial impacts of Microsoft’s Nevada accounting on Washington State’s budget and the related $4b in education cuts. So, I’ve often had to use different angles to get the story reported http://jeffreifman.com/media/microsofts-tax-dodge/ – sometimes focusing on ethics, sometimes on the law and sometimes on the corruption – e.g. 17 yr ex-MSFT veteran Ross Hunter leading the changes to the law.

      Some courts have ruled that states can collect tax on intangible property (software royalties) based on several tests, including physical nexus regardless of where a company chooses to record its profits. Many courts have ruled that alter ego’s are illegal constructions when used to evade taxes. Many courts have ruled to support laws related to the step doctrine – e.g. Microsoft’s Nevada accounting is both an alter ego and an elaborate “illusory” step to avoid paying tax in Washington. Washington State for a variety of reasons has chosen not to sue Microsoft over the taxes. The fact that the state chooses not to take on a legal battle with a favorite son does not actually make the practice of tax evasion legal – it just means that due to Microsoft’s influence in the state’s political operations, that the state is not enforcing the law. It could also mean that the tax dodge is a legal tax dodge. I say – the issue is not clear and should have been put to a legal test. You’re welcome to differ on this point but it’s wrong to call me a liar. 

      I’m not sorry if I haven’t called attention to this matter in the way that you please … but perhaps Microsoft’s not releasing its actual royalty tax payments also upsets you. I’m not doing this for you. I’m doing this so that people in Washington State understand the financial impacts of Microsoft’s Nevada office and the lack of action by our state officials.

  10. Washington State is also in the process of cutting taxes in half for the big 3 breweries (AB-InvBev/Miller/Coors) and more than doubling taxes on small brewers.  This is being done under the guise of funding early childhood education, but its really a favor that Reuven Carlye needs to put into the budget for his backers:


    There’s a rally in Olympia on Friday if anyone is interested:


    We really need a state income tax here.  It’s embarrassing that we constantly go after small business owners to plug budget shortfalls.

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