FASTENAL COFAST
FASTENAL CO Income Taxes Disclosure
Note 7. Income Taxes
Income before income taxes were derived from the following sources:
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 1,515.2 | 1,390.6 | 1,392.7 | |||||||||||||
| Foreign | 139.8 | 117.5 | 129.3 | ||||||||||||||
| Income before income taxes | $ | 1,655.0 | 1,508.1 | 1,522.0 | |||||||||||||
Components of income tax expense (benefit) were as follows:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Current | Deferred | Total | Current | Deferred | Total | Current | Deferred | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Federal | $ | 276.6 | 6.8 | 283.4 | 265.6 | (3.0) | 262.6 | 273.3 | (9.2) | 264.1 | |||||||||||||||||||||||||||||||||||||||||||
| State | 63.5 | 0.7 | 64.2 | 56.1 | (0.1) | 56.0 | 59.6 | (1.3) | 58.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign | 50.3 | (1.3) | 49.0 | 39.6 | (0.7) | 38.9 | 44.9 | (0.3) | 44.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | $ | 390.4 | 6.2 | 396.6 | 361.3 | (3.8) | 357.5 | 377.8 | (10.8) | 367.0 | |||||||||||||||||||||||||||||||||||||||||||
Income taxes paid were as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 276.4 | 269.6 | 276.8 | |||||||||||||
| State | 60.5 | 54.6 | 60.9 | ||||||||||||||
| Foreign | 61.9 | 36.3 | 51.5 | ||||||||||||||
| Total income taxes paid | $ | 398.8 | 360.5 | 389.2 | |||||||||||||
Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:
| 2025 | 2024 | 2023 | |||||||||||||||
| Mexico | 36.5 | * | 20.1 | ||||||||||||||
* Jurisdiction below the threshold for the period presented.
Income tax expense in the accompanying consolidated financial statements differed from the expected expense as follows:
2025 (1) | 2024 (2) | 2023 (3) | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| $ | 347.5 | 21.0 | % | 316.7 | 21.0 | % | 319.6 | 21.0 | % | ||||||||||||||||||||||||||
| Increase (decrease) attributed to | |||||||||||||||||||||||||||||||||||
| State and local income taxes | 50.7 | 3.1 | % | 43.4 | 2.9 | % | 45.1 | 3.0 | % | ||||||||||||||||||||||||||
| Foreign tax effects | 18.9 | 1.1 | % | 14.2 | 0.9 | % | 17.4 | 1.1 | % | ||||||||||||||||||||||||||
| Effect of cross-border tax laws | (6.4) | -0.4 | % | (5.7) | -0.4 | % | (5.6) | -0.4 | % | ||||||||||||||||||||||||||
| Tax credits | (5.8) | -0.4 | % | (5.2) | -0.3 | % | (5.4) | -0.4 | % | ||||||||||||||||||||||||||
| Changes in valuation allowances | 0.2 | 0.0 | % | (0.2) | 0.0 | % | 0.4 | 0.0 | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items | (2.4) | -0.1 | % | (10.4) | -0.7 | % | (6.4) | -0.4 | % | ||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (7.4) | -0.4 | % | 0.7 | 0.0 | % | 1.4 | 0.1 | % | ||||||||||||||||||||||||||
| Other, net | 1.3 | 0.1 | % | 4.0 | 0.3 | % | 0.5 | 0.0 | % | ||||||||||||||||||||||||||
| Total income tax expense, Effective income tax rate | $ | 396.6 | 24.0 | % | 357.5 | 23.7 | % | 367.0 | 24.1 | % | |||||||||||||||||||||||||
(1) | In 2025, state taxes in Minnesota, Wisconsin, California, Illinois, New York, and Indiana made up the majority (greater than 50%) of the tax effect in this category. | ||||
(2) | In 2024, state taxes in Wisconsin, Minnesota, California, Illinois, New York, and Kansas made up the majority (greater than 50%) of the tax effect in this category. | ||||
(3) | In 2023, state taxes in Wisconsin, California, Minnesota, Illinois, New York, and Kansas made up the majority (greater than 50%) of the tax effect in this category. | ||||
The tax effects of temporary differences that give rise to deferred income tax assets and liabilities at year end consisted of the following:
| 2025 | 2024 | ||||||||||
| Deferred income tax assets | |||||||||||
| Inventory costing and valuation methods | $ | 6.8 | 5.9 | ||||||||
| Insurance reserves | 8.0 | 5.5 | |||||||||
| Foreign net operating loss and credit carryforwards | 2.6 | 2.4 | |||||||||
| Stock-based compensation | 4.4 | 3.7 | |||||||||
| Operating lease liabilities | 80.1 | 72.2 | |||||||||
| Section 174 capitalization | 7.3 | 11.1 | |||||||||
| Other, deferred tax assets | 11.0 | 8.3 | |||||||||
| Total deferred income tax assets | 120.2 | 109.1 | |||||||||
| Less: Valuation allowances | (2.0) | (1.8) | |||||||||
| Total net deferred income tax assets | 118.2 | 107.3 | |||||||||
| Deferred income tax liabilities | |||||||||||
| Property and equipment | (101.3) | (90.9) | |||||||||
| Operating lease ROU assets | (78.1) | (70.6) | |||||||||
| Prepaid expenses | (3.7) | (4.6) | |||||||||
| Other, deferred tax liabilities | (0.3) | (0.2) | |||||||||
| Total deferred income tax liabilities | (183.4) | (166.3) | |||||||||
| Net deferred income tax liabilities | $ | (65.2) | (59.0) | ||||||||
A reconciliation of the beginning and ending amount of total gross unrecognized tax benefits is as follows:
| 2025 | 2024 | ||||||||||
| Balance at beginning of year | $ | 9.9 | 10.2 | ||||||||
| Increase related to prior year tax positions | 0.7 | 1.1 | |||||||||
| Increase related to current year tax positions | 0.4 | 0.4 | |||||||||
| Decrease related to statute of limitation lapses | (2.5) | (1.8) | |||||||||
| Decrease related to prior year tax positions | (6.3) | — | |||||||||
| Balance at end of year | $ | 2.2 | 9.9 | ||||||||
Included in the liability for gross unrecognized tax benefits is $0.2 as of December 31, 2025 and $4.2 as of December 31, 2024 for interest and penalties, both of which we classify as a component of income tax expense. The amount of unrecognized tax benefits that would favorably impact the effective tax rate, if recognized, is $1.7 as of December 31, 2025 and $9.1 as of December 31, 2024. The 2025 and 2024 liability is included in deferred income taxes in the Consolidated Balance Sheets.
We file income tax returns in the U.S. federal jurisdiction, all states, and various local and foreign jurisdictions. We are no longer subject to income tax examinations by taxing authorities for taxable years before 2022 in the case of U.S. federal examinations, and with limited exception, before 2020 in the case of foreign, state, and local examinations.
In general, it is our practice and intention to permanently reinvest the income of our foreign subsidiaries and repatriate income only when the tax impact is zero or very minimal. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of our approximately $625.3 of undistributed income from foreign subsidiaries to the U.S. as that income continues to be permanently reinvested. It is not practicable to estimate the amount of unrecognized deferred tax liability on these undistributed earnings because of complexities of tax laws, the hypothetical calculation and the significant assumptions required regarding future repatriation strategies.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 5, 2026 | Showing above |
| 2024 | Feb 6, 2025 | |
| 2023 | Feb 6, 2024 | |
| 2022 | Feb 7, 2023 | |
| 2021 | Feb 7, 2022 | |
| 2020 | Feb 8, 2021 | |
| 2019 | Feb 6, 2020 | |
| 2015 | Feb 5, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.