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Note 15: Income Taxes
A reconciliation of the statutory federal income tax rate with the Company’s effective income tax rate is as follows:
FISCAL YEAR ENDED Oct 1, 2006 Oct 2, 2005 Oct 3, 2004
Statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit 3.4 3.9 3.5
Other, net (2.6) (1.0) (1.2)
Effective tax rate 35.8% 37.9% 37.3%
The provision for income taxes consists of the following (in thousands):
FISCAL YEAR ENDED Oct 1, 2006 Oct 2, 2005 Oct 3, 2004
Current taxes:
Federal $332,202 $273,178 $188,647
State 57,759 51,949 36,383
Foreign 12,398 14,106 10,193
Deferred taxes, net (77,589) (37,256) (3,469)
Total $324,770 $301,977 $231,754
U.S. income and foreign withholding taxes have not been provided on approximately $178.5 million of cumulative
undistributed earnings of foreign subsidiaries and equity investees. The Company intends to reinvest these earnings for
the foreseeable future. If these amounts were distributed to the United States, in the form of dividends or otherwise, the
Company would be subject to additional U.S. income taxes. Determination of the amount of unrecognized deferred
income tax liabilities on these earnings is not practicable because such liability, if any, is dependent on circumstances
existing if and when remittance occurs.
In December 2004, the FASB issued Staff Position No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2”). The American Jobs
Creation Act allowed a special one-time dividends received deduction on the repatriation of certain foreign earnings to a
U.S. taxpayer (repatriation provision), provided certain criteria are met. The law allowed the Company to make an
election to repatriate earnings through 2006. During the Company’s fiscal third quarter of 2006, Starbucks completed its
evaluation and elected to waive repatriation of earnings under this provision.
62 STARBUCKS CORPORATION, FORM 10-K