Apple paid less than ten percent in taxes on their overall profits in 2011, a New York Times cover story revealed Sunday. Apple executives set up a company in Reno, Nevada called Braeburn Capital to handle and invest the company's money. A portion of all domestic Apple sales goes through the Nevada company. By setting up an office in Reno and funnelling their profits there, Apple is able to take advantage of the state's zero percent corporate tax rate. Apple's headquarters are in California, but that state's tax rate is considerably higher at 8.84 percent. Since founding the company, Apple has made an additional $2.4 billion off interest and stock dividends.
Apple made similar moves around the world, establishing offices in low-tax countries and funnelling large portions of their profits there, Apple has been able to avoid paying the the 35 percent U.S. federal tax. Using an accounting technique called the "Double Irish With a Dutch Sandwich," Apple transfers money from their California subsidiaries to two companies in Ireland, which can then transfer the money to low-tax countries in Netherlands, or elsewhere. The Times has a handy info-graphic to track how the money moves from one country to another.
In total, Apple only paid $3.3 billion in taxes on $34.2 billion in profits. It works out to a 9.8 percent tax rate. Not too shabby.