v3.25.2
Income Taxes
 12 Months Ended
Aug. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
Note 8—Taxes
Income Taxes
Income before income taxes is comprised of the following:
202520242023
Domestic$8,324 $7,255 $6,264 
Foreign2,494 2,485 2,223 
Total$10,818 $9,740 $8,487 
The provisions for income taxes are as follows:
202520242023
Federal:
Current$1,395 $1,245 $1,056 
Deferred(42)48 33 
Total federal1,353 1,293 1,089 
State:
Current449 431 374 
Deferred(18)(77)10 
Total state431 354 384 
Foreign:
Current955 798 732 
Deferred(20)(72)(10)
Total foreign935 726 722 
Total provision for income taxes$2,719 $2,373 $2,195 
The reconciliation between the statutory tax rate and the effective rate for 2025, 2024, and 2023 is as follows:
 202520242023
Federal taxes at statutory rate$2,272 21.0 %$2,045 21.0 %$1,782 21.0 %
State taxes, net338 3.1 288 3.0 302 3.6 
Foreign taxes, net222 2.1 109 1.1 160 1.9 
Employee stock ownership plan (ESOP)(28)(0.3)(120)(1.2)(25)(0.3)
Other(85)(0.8)51 0.5 (24)(0.3)
Total$2,719 25.1 %$2,373 24.4 %$2,195 25.9 %
The Company's effective tax rate in 2025, 2024, and 2023 included tax benefits of $100, $45, and $54, related to stock compensation. In 2024, tax benefits also included $94 related to the portion of the special dividend payable through the Company's 401(k) plan and a net non-recurring tax benefit of $63 related to a transfer pricing settlement and certain true-ups of tax reserves.
The components of the deferred tax assets (liabilities) are as follows:
20252024
Deferred tax assets:
Equity compensation$100 $96 
Deferred income/membership fees369 313 
Foreign tax credit carry forward390 315 
Operating lease liabilities699 678 
Accrued liabilities and reserves917 873 
Total deferred tax assets2,475 2,275 
Valuation allowance(554)(494)
Total net deferred tax assets1,921 1,781 
Deferred tax liabilities:
Property and equipment(944)(948)
Merchandise inventories(305)(296)
Operating lease right-of-use assets(670)(652)
Foreign branch deferreds(103)(105)
Other(31)(1)
Total deferred tax liabilities(2,053)(2,002)
Net deferred tax liabilities$(132)$(221)
The deferred tax accounts at the end of 2025 and 2024 include deferred income tax assets of $592 and $548, included in other long-term assets; and deferred income tax liabilities of $724 and $769, included in other long-term liabilities.
In 2025 and 2024, the Company had valuation allowances of $554 and $494, primarily related to foreign tax credits that the Company believes will not be realized due to carry forward limitations. The foreign tax credit carry forwards are set to expire beginning in fiscal 2030.
The Company generally no longer considers fiscal year earnings of non-U.S. consolidated subsidiaries (other than China) indefinitely reinvested after 2023, in the case of Taiwan, and after 2017, in the case of all other subsidiaries, and has recorded the estimated incremental foreign withholding taxes (net of available foreign tax credits) and state income taxes payable assuming a hypothetical repatriation to the U.S. The Company considers undistributed earnings of certain non-U.S. consolidated subsidiaries, which totaled $3,177, to be indefinitely reinvested and has not provided for withholding or state taxes.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2025 and 2024 is as follows:
20252024
Gross unrecognized tax benefit at beginning of year$81 $16 
Gross increases—current year tax positions9 3 
Gross increases—tax positions in prior years14 64 
Gross decreases—tax positions in prior years(38)— 
Gross decreases—settlements(1)— 
Lapse of statute of limitations— (2)
Gross unrecognized tax benefit at end of year$65 $81 
The gross unrecognized tax benefit includes tax positions for which the ultimate deductibility is highly certain but there is uncertainty about the timing of such deductibility. At the end of 2025 and 2024, these amounts were immaterial. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. The total amount of such unrecognized tax benefits that if recognized would favorably affect the effective income tax rate in future periods is $65 and $79 at the end of 2025 and 2024.
Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. Accrued interest and penalties recognized during 2025 and 2024, and accrued at the end of each respective period were immaterial.
The Company is currently under audit by several jurisdictions in the U.S. and abroad. Some audits may conclude in the next 12 months, and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next 12 months.
The Company files income tax returns in the U.S., various state and local jurisdictions, in Canada, and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local examination for years before fiscal 2018. The Company is currently subject to examination in California for fiscal years 2013 to present.
Other Taxes
The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments from the authorities. Possible losses or range of possible losses associated with these matters are either immaterial or an estimate of the possible loss or range of loss cannot be made at this time. If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of an individual fiscal quarter or year.