Netflix Posted Biggest-Ever Profit in 2018 and Paid $0 in Taxes

[Mr. Sparkle]

Hugely profitable tech company provides first look at how corporations are faring under new tax law

The popular video streaming service Netflix posted its largest-ever U.S. profit in 2018­­—$845 million—on which it didn’t pay a dime in federal or state income taxes. In fact, the company reported a $22 million federal tax rebate.

After a year of speculation and spin, the public is getting its first hard look at how corporate tax law changes under the Tax Cuts and Jobs Act affected the tax-paying habits of corporations. The law sharply reduced the federal corporate rate, expanded some tax breaks and curtailed others. The new tax law took effect at the beginning of 2018, which means that companies are just now closing the books on their first full year under the new rules.

If Netflix’s earnings report is any indication, not much has changed. Many corporations are still able to exploit loopholes and avoid paying the statutory tax rate—only now, that rate is substantially lower.

Netflix’s tax avoidance should come as no surprise to those who followed the debate leading up to the passage of the new tax law: A 2017 ITEP report identified Netflix as one of 100 profitable Fortune 500 corporations that paid a 0 percent federal income tax rate in at least one profitable year between 2008 and 2015. In fact, Netflix did it twice, and paid an average tax rate of 13.6 percent over the eight-year period, meaning that the company sheltered more than half of its profits from the 35 percent federal income tax rate in effect at the time.

https://itep.org/netflix-posted-biggest-ever-profit-in-2018-and-paid-0-in-income-taxes/

[MosheFeingold]

1. Oh come on

Does no one know how accounting works?

There is a difference between tax accounting and GAAP accounting. This article mixes the two.

GAAP accounting is for the SEC. That's where is showed a profit.

Tax accounting is for the IRS. That's where it did not show a profit.

I don't know Netflix's situation, but it is a growth company, investing heavily in new equipment and new content. Both get "depreciated" for tax purposes (and GAAP -- but differently) -- the equipment probably all during this year for tax accounting and the content over some period of time (don't know).

The depreciation for tax results in no tax due. This is done to encourage investment.

The depreciation for GAAP is done over the life expectancy of the items, so it shows a profit for investors.

[stuffmatters]

2. The gross receipts/point of sale tax plan for large corps interests me.

I've never seen a full description or revenue projection, but remember it was listed as a major source of revenue in
the Ca universal health insurance proposal. Elizabeth Warren & UC Berkeley economist(s) have proposed it. Possibly other academics from progressive Economics Departments like UT Austin & UMass Amherst have also presented this as one route to make "global"Corps pay proportionately back the local, state and federal consumers and economies that support them.