Apple, based in Cupertino, California (photo), funnels revenues and profits through a small office in Reno, Nevada, to avoid paying California’s 8.84% corporate tax rate, The New York Times said on Sunday.

Apple also subsidiaries in Luxembourg, the British Virgin Islands, Ireland and the Netherlands to reduce the amount it hands over to governments around the world, according to the newspaper, which has the third highest daily circulation in the US.

Under US tax rules, technology companies are allowed to declare where earnings are made, in contrast to physical goods which are taxed where they are geographically sold.

The Times article said that the iPad and iPhone maker would have paid $2.4 billion more in taxes last year without the arrangements, which are perfectly legal. The company told the newspaper that it paid nearly five billion dollars in federal and state income taxes during the first half of the 2012 fiscal year.

Wall Street analysts expect Apple to earn $46.9 billion in profits for the current fiscal year, according to the Associated Press.

In 2010, Bloomberg News reported that fellow Silicon Valley giant Google saved $3.1 billion in taxes by using similar offshore vehicles in Ireland and the Netherlands.