Since it's safe to assume a majority of that 94% is from sales inside the US, how does that money actually make it out of the US without first paying tax on it?
Apple's tax practices seem to be greatly misunderstood, even when considering them in broad strokes. Far too often what it does domestically is conflated with what it does internationally, and people assume that it is doing things with regard to domestic taxes (i.e. those paid to the U.S. and to U.S. states) which it is not doing.
The short version of my point: No, the majority of that 94% you refer to isn't from sales inside the United States.
A bit longer version of that point: Yes, it is true that when it comes to profits that Apple legitimately generates outside of the U.S., Apple uses accounting practices that effectively funnel, as some refer to it, a large portion of those profits through jurisdictions where it realizes very low tax rates. In other words it avoids income taxes on them to a great extent, presumably legally. In this way Apple saves billions in foreign taxes which it might otherwise have to pay.
Just to be clear, when I say legitimately I mean based on a fair - some might call it a common sense - assessment of where those profits were really generated, without using accounting tricks to claim that they were generated in certain jurisdictions when in reality they were generated elsewhere. I mean something close to: For the most part, where you sell something is where you 'make' the profit that comes from that sale. Obviously in practice - based on standard accounting methods - it's considerably more complicated than that.
When it comes to the profits that I would consider as legitimately made in the United States, Apple for the most part doesn't do the kinds of things that it does with its foreign profits. It doesn't use accounting tricks to shift those profits out of the U.S. and thus avoid paying U.S. income taxes on them. I'm gonna walk through some sales and tax numbers. I'll of course be oversimplifying things, there's more to the actual calculations (and considerations) than these numbers get at, but I'm trying to give a big picture view of the situation.
Apple doesn't break out its U.S. revenue or income, but it does break out revenue and segment operating income for the Americas as a whole. Over the last 3 fiscal years, revenue for Apple's Americas segment was $260.6 billion while operating income for that segment was $85.5 billion. That segment operating income doesn't take into account Apple's non-segment operating expenses - expenses that are more properly attributed to the company as a whole than to particular geographic segments. Those expenses totaled $36.6 billion for the last 3 years. If we apportion those company expenses to the respective geographic segments (in this case I used revenue share, but there are other basis we could use), we get an income of around $70.4 billion for Apple's Americas segment. (Again, I'm oversimplifying.) We could argue the numbers on the margins, but that's a fair ballpark at least for Apple's pre-tax profits from sales made in the Americas. There's a small amount of investment income (net of interest expenses) that should also be attributed to that geographic region, but its exclusion is more than made up for by the reality that the profit share we're looking at includes more than just the U.S., it includes all of the Americas (which increases the supposed tax base that we're looking at by around $8 billion).
For those 3 years Apple paid $28.0 billion in U.S. federal income taxes. That does not include provisions that Apple made for so-called repatriation taxes on unremitted foreign earnings. Those provisions show up as deferred taxes on Apple's reports and contribute to the effective tax rate that gets reported. That represents Apple saying: We don't owe these taxes right now because the foreign subsidiaries which made that money haven't remitted it to the parent company yet; however, we intended for that to happen at some point in the future, so we're accounting for that tax liability in our earnings reports. (Apple does that with about half of the foreign earnings that it doesn't bring to the United States.) The $28.0 billion only includes current U.S. federal income taxes, not those deferred taxes. It also does not include U.S. state income taxes.
Comparing that $28.0 billion in U.S. federal taxes to the $70.4 billion in profit from sales in the Americas would yield an aggregate tax rate for those 3 years of 39.8%. The federal corporate tax rate is 35%. And that 39.8% is after deductions for domestic production activities and credits for research and development which combined represent around 2.7% in tax savings. In other words, without those deductions and credits the rate would be around 42.5%. That's without considering state incomes taxes or deferred federal taxes, and while including sales from other parts of the Americas while only looking at the taxes paid to the U.S., not to other nations in the Americas. If we looked only at sales in the U.S., but added in the investment income I referred to earlier, the rate would be something like 47-48%. That's way above the (maximum) federal corporate tax rate of 35%.
Again, there's considerable nuance (e.g. relating to income recognition rules) that is being left out here. But the point remains: Apple doesn't (on-net) funnel profits from U.S. sales offshore in order to reduce its U.S. tax liability. The U.S. taxes that it pays effectively use a base that is actually significantly greater than the profits from its U.S. sales. That's to be expected based on some of that nuance that I referred to. Apple also pays U.S. taxes - so-called repatriation taxes - on some, though not the great majority of, its foreign earnings. In other words, it returns some of those earnings to the United States.
Turning to Apple's foreign taxes, and skipping over some of the detail (while using computations similar to those used above for domestic taxes), we get a supposed aggregate foreign tax rate for those 3 years of around 7-8% based on the profits from Apple's foreign sales. Combining quite high domestic (including state) income taxes with quite low foreign income taxes, over the last 3 fiscal years Apple paid $40.1 billion (net of deferred tax effects) in income taxes on $187.4 billion in total pre-tax income. That represents an effective tax rate of 21.4%. That's lower than Apple's reported effective tax rate (of around 26% for each of those years) due to not including deferred taxes that were accounted for.
The TL;DR takeaway: Apple doesn't for the most part using accounting tricks to funnel its U.S. earnings off-shore in order to avoid paying lots of U.S. federal income taxes. It actually pays very high U.S. taxes. It does, however, funnel a lot of its foreign earnings through jurisdictions with low effective tax rates in order to avoid paying lots of foreign income taxes. In recent years it's paid more than 3 times as much in domestic taxes as it has in foreign taxes even though its foreign revenues (and foreign segment earnings) have been close to twice as much as its domestic revenues (and domestic-sales-based earnings). Also, Apple does avoid paying even more domestic taxes by not remitting most of its foreign earnings - its legitimate foreign earnings, not earnings that are only foreign by way of clever accounting - to the United States (i.e. to the parent company from foreign subsidiaries).
