WILLIAMS SONOMA INCWSM
WILLIAMS SONOMA INC Income Taxes Disclosure
Income Taxes
The components of earnings before income taxes, by tax jurisdiction, are as follows:
| For the Fiscal Year Ended | |||||||||||||||||
| (In thousands) | February 1, 2026 | February 2, 2025 | January 28, 2024 | ||||||||||||||
United States | $ | 1,253,410 | $ | 1,301,017 | $ | 1,154,160 | |||||||||||
Foreign | 199,150 | 184,715 | 119,195 | ||||||||||||||
Total | $ | 1,452,560 | $ | 1,485,732 | $ | 1,273,355 | |||||||||||
The provision for income taxes consists of the following:
| For the Fiscal Year Ended | |||||||||||||||||
| (In thousands) | February 1, 2026 | February 2, 2025 | January 28, 2024 | ||||||||||||||
Current | |||||||||||||||||
Federal | $ | 242,980 | $ | 276,201 | $ | 275,734 | |||||||||||
State | 65,877 | 64,834 | 54,903 | ||||||||||||||
Foreign | 34,951 | 29,187 | 22,041 | ||||||||||||||
| Total current | $ | 343,808 | $ | 370,222 | $ | 352,678 | |||||||||||
Deferred | |||||||||||||||||
Federal | $ | 22,799 | $ | (7,608) | $ | (30,632) | |||||||||||
State | (2,024) | (1,925) | 686 | ||||||||||||||
Foreign | (460) | (208) | 861 | ||||||||||||||
| Total deferred | $ | 20,315 | $ | (9,741) | $ | (29,085) | |||||||||||
Total provision | $ | 364,123 | $ | 360,481 | $ | 323,593 | |||||||||||
On July 4, 2025, the One Big Beautiful Bill Act (“OBBB”) was signed into law in the United States. The OBBB includes a broad range of tax reform provisions, including permanently extending and modifying certain expiring provisions of the 2017 Tax Cuts and Jobs Act. The legislation has multiple effective dates, with certain provisions becoming effective in fiscal 2025 and the majority taking effect in future years. The OBBB had a minimal impact on the effective tax rate but resulted in favorable cash tax impacts in fiscal 2025 as a result of certain accelerated tax deductions.
Since the Organization for Economic Co-operation and Development (“OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (“Framework”) in 2021, a number of countries have begun to enact legislation to implement the Framework, including the Pillar Two minimum tax. Our subsidiaries were not subject to Pillar Two minimum tax in fiscal 2025. Pillar Two minimum tax will be treated as a period cost in future periods when it is applicable. We are continuing to evaluate the potential impact of the Framework on future periods and monitoring legislative developments by other countries, especially in the regions in which we operate.
For fiscal 2025, ASU 2023-09 requires an expanded view of the rate reconciliation as well as a summary of income taxes paid for material jurisdictions. We have elected a prospective presentation. The tables below represent the new standard for fiscal 2025 and revert to prior guidance for comparable years.
A reconciliation of income taxes at the federal statutory corporate rate to the effective rate is as follows:
| For the Fiscal Year Ended | |||||||||||
| February 1, 2026 | |||||||||||
| (In thousands) | $ | % | |||||||||
| United States federal statutory tax rate | $ | 305,038 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect 1 | 59,484 | 4.1 | |||||||||
| Foreign tax effects | (3,667) | (0.3) | |||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | |||||||||
| Effect of cross-border tax laws | 69 | — | |||||||||
| Tax credits | (397) | — | |||||||||
| Changes in valuation allowance | — | — | |||||||||
| Nontaxable or nondeductible items | 6,818 | 0.5 | |||||||||
| Changes in unrecognized tax benefits | (1,907) | (0.1) | |||||||||
| Other adjustments | (1,315) | (0.1) | |||||||||
| Effective tax rate | $ | 364,123 | 25.1 | % | |||||||
1State taxes in California, New York, New Jersey and Illinois make up the majority of the tax effect in this category.
A reconciliation of income taxes at the federal statutory corporate rate to the effective rate for prior fiscal years is as follows:
| For the Fiscal Year Ended | ||||||||||||||
| February 2, 2025 | January 28, 2024 | |||||||||||||
| Federal income taxes at the statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| State income tax rate | 4.1 | 4.4 | ||||||||||||
| Officer’s compensation under Sec.162(m) | 0.9 | 0.9 | ||||||||||||
| Change in uncertain tax positions | 0.2 | (0.5) | ||||||||||||
| Deferred true up | — | 0.2 | ||||||||||||
| Stock-based compensation | (1.1) | (0.3) | ||||||||||||
Foreign rate differential | (0.5) | (0.3) | ||||||||||||
| Credits | (0.1) | — | ||||||||||||
| Other | (0.2) | — | ||||||||||||
| Total | 24.3 | % | 25.4 | % | ||||||||||
The company’s income taxes paid (net of refunds received), are as follows:
| For the Fiscal Year Ended | |||||
| (In thousands) | February 1, 2026 | ||||
| Federal | $ | 226,000 | |||
| State: | |||||
| California | 20,861 | ||||
| Other | 53,227 | ||||
| Total State | 74,088 | ||||
| Foreign | 30,216 | ||||
| Total | $ | 330,304 | |||
Significant components of our deferred income tax accounts are as follows:
| As of | |||||||||||
| (In thousands) | February 1, 2026 | February 2, 2025 | |||||||||
| Deferred tax assets (liabilities) | |||||||||||
| Operating lease liabilities | $ | 367,263 | $ | 332,146 | |||||||
| Merchandise inventories | 38,056 | 36,935 | |||||||||
| Compensation | 34,037 | 28,832 | |||||||||
| Gift cards | 26,549 | 24,515 | |||||||||
| Accrued liabilities | 15,845 | 16,879 | |||||||||
| Executive deferred compensation | 13,472 | 12,204 | |||||||||
| Stock-based compensation | 12,752 | 13,822 | |||||||||
| State taxes | 9,298 | 7,956 | |||||||||
| Loyalty rewards | 2,694 | 2,972 | |||||||||
| State net operating loss | 929 | 977 | |||||||||
| Operating lease right-of-use assets | (318,480) | (294,216) | |||||||||
| Property and equipment | (74,947) | (34,254) | |||||||||
| Deferred lease incentives | (23,803) | (23,452) | |||||||||
| Other | (5,403) | (7,587) | |||||||||
Valuation allowance | (743) | (1,198) | |||||||||
Total deferred tax assets, net | $ | 97,519 | $ | 116,531 | |||||||
We had net state operating loss carry-forwards as of February 1, 2026. A valuation allowance has been provided against certain state net operating loss carry-forwards, as we do not expect to fully utilize the losses in future years.
The following table summarizes the activity related to gross unrecognized tax benefits:
| For the Fiscal Year Ended | |||||||||||||||||
| (In thousands) | February 1, 2026 | February 2, 2025 | January 28, 2024 | ||||||||||||||
| Beginning balance | $ | 32,373 | $ | 31,582 | $ | 37,068 | |||||||||||
Increases related to current year tax positions | 6,059 | 5,119 | 4,966 | ||||||||||||||
Increases for tax positions for prior years | 276 | 271 | 194 | ||||||||||||||
Decrease for tax positions for prior years | (245) | (558) | (1,170) | ||||||||||||||
| Settlements | — | (370) | — | ||||||||||||||
Lapse in statute of limitations | (3,415) | (3,671) | (9,476) | ||||||||||||||
| Ending balance | $ | 35,048 | $ | 32,373 | $ | 31,582 | |||||||||||
As of February 1, 2026, we had $35.0 million of gross unrecognized tax benefits, of which $28.1 million would, if recognized, affect the effective tax rate.
We accrue interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of February 1, 2026 and February 2, 2025, accruals for the payment of interest and penalties totaled $8.2 million and $6.7 million, respectively.
We file income tax returns in the U.S. and foreign jurisdictions. We are subject to examination by the tax authorities in these jurisdictions. U.S. federal taxable years for which the statute of limitations has not expired are fiscal years 2022 to 2025. Substantially all material state, local and foreign jurisdictions’ statutes of limitations are closed for taxable years prior to 2021.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 26, 2026 | Showing above |
| 2025 | Mar 27, 2025 | |
| 2024 | Mar 20, 2024 | |
| 2023 | Mar 24, 2023 | |
| 2022 | Mar 28, 2022 | |
| 2021 | Mar 30, 2021 | |
| 2020 | Mar 27, 2020 | |
| 2019 | Apr 4, 2019 | |
| 2018 | Mar 29, 2018 | |
| 2017 | Mar 30, 2017 | |
| 2016 | Mar 31, 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.