Every public company is legally obligated to pay taxes. Well-run businesses have effective tax strategies in place that allow them to take advantage of as many tax credits and loopholes as possible, thereby lowering their tax rate. All companies have the same basic tax rate, but the actual rate of tax paid after tax credits and deductions is known as the "effective tax rate." Due to accrual accounting, the amount that companies actually pay in cash to the Internal Revenue Service often differs from the amount listed on the income statement, mainly because the number reported on the income statement is an estimate.
Step 1
Obtain the annual report for the company whose taxes you are researching. You can download this from the company's website – look under "Investor Relations" or a similarly named section. You can also download financial reports for many publicly traded companies from Yahoo! Finance – click on "SEC filings" on the left pane and enter the ticker symbol for the company you want to research.
Step 2
Go to the "Income" statement once you've downloaded the annual report. At the bottom of this statement, look for "Provision for Income Taxes." This line item usually appears just before "Net Income." The amount shown here is an estimate of the taxes paid for the year.
Step 3
Go to the "Cash Flow" statement. The statement of cash flow will usually have information about the actual "cash" taxes in a section at the bottom of the statement called "Supplemental Disclosure of Cash Flows Information." Look for the line item "Cash Recovered (Paid) During the Year for Income Taxes" or something similar.
Step 4
Go to the "Notes to the Financial Statements" and search for the "Income Taxes" line item. Almost all annual reports have a narrative that accompanies the income tax provision explaining how the company calculated the provision for income tax expense.