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Income Taxes
 12 Months Ended
Oct. 02, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s income (loss) before provision for (benefit from) income taxes for fiscal 2021, 2020 and 2019 were as follows: 
 October 2,
2021		October 3,
2020		September 28,
2019
(In thousands)
Domestic$126,810 $(15,194)$(858)
Foreign30,115 (4,889)(218)
Income (loss) before provision for (benefit from) income taxes$156,925 $(20,083)$(1,076)
 
Components of the provision for (benefit from) income taxes consisted of the following:
 
 October 2,
2021		October 3,
2020		September 28,
2019
(In thousands)
Current:
U.S. Federal$— $(1,388)$1,366 
U.S. State440 724 1,132 
Foreign6,216 1,220 1,463 
Total current6,656 556 3,961 
Deferred:
U.S. Federal— — — 
U.S. State— — — 
Foreign(8,326)(524)(271)
Total deferred(8,326)(524)(271)
Provision for (benefit from) income taxes$(1,670)$32 $3,690 

The Company is subject to income taxes in the United States and foreign jurisdictions in which it operates. The Company’s tax provision is impacted by the jurisdictional mix of earnings as its foreign subsidiaries have statutory tax rates different from those in the United States.
Components of the Company’s deferred income tax assets and liabilities are as follows: 
 October 2,
2021		October 3,
2020
(In thousands)
Deferred tax assets
Accrued expenses and reserves$18,601 $12,014 
Deferred revenue13,915 11,831 
U.S. net operating loss carryforwards25,284 8,242 
Foreign net operating loss carryforwards13,240 12,183 
Research & development tax credit carryforwards77,607 53,543 
Stock-based compensation9,082 11,018 
Operating lease liability9,908 14,377 
U.S. amortization8,031 7,648 
Depreciation1,875 1,101 
Other428 603 
Total deferred tax assets177,971 132,560 
Valuation allowance(155,978)(113,939)
Deferred tax assets, net of valuation allowance21,993 18,621 
Deferred tax liabilities
Tax accounting method change(962)(2,946)
Right-of-use asset(7,388)(9,914)
Foreign amortization(5,833)(6,093)
Depreciation(32)(187)
Other(144)(115)
Total deferred tax liabilities(14,359)(19,255)
Net deferred tax assets (liabilities)$7,634 $(634)
Reported as
Deferred tax assets$10,028 $1,800 
Deferred tax liabilities(2,394)(2,434)
Net deferred tax assets (liabilities)$7,634 $(634)

The Company has assessed, on a jurisdictional basis, the realization of its net deferred tax assets, including the ability to carry back net operating losses, the existence of taxable temporary differences, the availability of tax planning strategies and available sources of future taxable income. The Company has concluded that based on cumulative taxable income and future taxable income that it is able to realize a benefit for net deferred tax assets in certain foreign jurisdictions. In addition, the Company has concluded that a valuation allowance on its net deferred tax assets in the U.S. and certain foreign jurisdictions continues to be appropriate considering cumulative taxable losses in recent years and uncertainty with respect to future taxable income.

During the fiscal year ended October 2, 2021, the Company determined that the net deferred tax asset of its Netherlands subsidiary was more-likely-than-not realizable and released valuation allowance of $7.8 million as an income tax benefit. The Company determined that the positive evidence, principally the Netherlands subsidiary being in a cumulative taxable income position with forecasts of future taxable income, outweighed the negative evidence, resulting in the valuation allowance release. It is possible that within the next 12 months there may be sufficient positive evidence to release a portion or all of the remaining valuation allowance. Release of the remaining valuation allowance would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective earnings in the United States and certain other foreign entities and jurisdictions.
As of October 2, 2021, the Company had gross U.S. federal net operating loss carryforwards of $101.4 million, of which $70.3 million have an indefinite life and $31.1 million expire beginning in 2035, gross state net operating loss carryforwards of $64.6 million, which expire beginning in 2027, and gross foreign net operating loss carryforwards of $53.3 million with an indefinite life. As of October 2, 2021, the Company also had gross federal and state research and development tax credit carryforwards of $62.0 million and $44.3 million, respectively. The federal research and development tax credits will begin to expire in 2025, and the state research and development tax credits will begin to expire in 2024.

Because of the change of ownership provisions of Sections 382 and 383 of the Internal Revenue Code, and similar state provisions, use of a portion of the Company’s U.S. federal and state net operating loss and research and development tax credit carryforwards may be limited in future periods depending upon changes in ownership. Further, a portion of the carryforwards may expire before being applied to reduce future taxable income and income tax liabilities if sufficient taxable income is not generated in future periods.

The following table summarizes changes in the valuation allowance for fiscal 2021, 2020 and 2019:

October 2,
2021		October 3,
2020		September 28,
2019
(In thousands)
Beginning balance$113,939 $95,088 $72,380 
Increase during the period49,791 18,851 22,708 
Decrease during the period(7,752)— — 
Ending balance$155,978 $113,939 $95,088 

Reconciliation of U.S. statutory federal income taxes to the Company’s provision for (benefit from) income taxes is as follows:
 
October 2,
2021		October 3,
2020		September 28,
2019
(In thousands)
U.S. federal income taxes at statutory rate$32,954 $(4,217)$(226)
U.S. state and local income taxes, net of federal benefit and state credits(9,473)(2,798)(9,315)
Foreign income tax rate differential1,430 (75)129 
Stock-based compensation(47,496)869 (2,399)
Federal research and development tax credits(21,535)(8,012)(8,418)
Unrecognized federal tax benefits4,041 815 (2,806)
Change in tax rate(2,681)— 1,161 
Global intangible low taxed income, net of foreign tax credits
— — 239 
Base erosion and anti-abuse tax— (781)781 
Other(565)598 822 
Change in valuation allowance41,655 13,633 23,722 
Provision for income taxes$(1,670)$32 $3,690 

In January 2017, the Company entered into a unilateral Advance Pricing Agreement (the "APA") with the Dutch Tax Administration. The APA establishes an intercompany licensing arrangement whereby the operating profit or loss, as determined under U.S. GAAP, of Sonos Europe B.V. and Sonos, Inc. will be allocated between the two companies based on relative contribution to the development of marketing and technology intangibles. The APA has a five-year term that commenced on October 2, 2016, and ended on September 30, 2021. The Company expects operating profit or loss of Sonos Inc. and Sonos Europe B.V. to continue to be allocated in a similar manner for future taxable years.
Change in gross unrecognized tax benefits, excluding interest and penalties, as a result of uncertain tax positions are as follows:
October 2,
2021		October 3,
2020		September 28,
2019
(In thousands)
Beginning balance$14,721 $12,527 $17,794 
Decrease - tax positions in prior periods(4)(768)(8,226)
Increase - tax positions in current periods6,535 2,962 2,959 
Ending balance$21,252 $14,721 $12,527 
 
The Company does not anticipate material changes to its unrecognized benefits within the next 12 months that would result in a material change to the Company’s financial position. The unrecognized tax benefits as of October 2, 2021, would have no impact on the effective tax rate if recognized.

The Company conducts business in a number of jurisdictions and, as such, is required to file income tax returns in multiple jurisdictions globally. U.S. federal income tax returns for the 2017 tax year and earlier are no longer subject to examination by the U.S. Internal Revenue Service (the "IRS"). All U.S. federal and state net operating losses as well as research and development tax credits generated to date, including 2017 and earlier, used in open tax years are subject to adjustment by the IRS and state tax authorities.

The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. There were no accrued interest or penalties as of October 2, 2021, and October 3, 2020.

As of October 2, 2021, the Company continues to assert that the unremitted earnings in our foreign subsidiaries are permanently reinvested and therefore no deferred taxes or withholding taxes have been provided. If, in the future, the Company decides to repatriate its $5.4 million of undistributed earnings from these subsidiaries in the form of dividends or otherwise, the Company could be subject to withholding taxes payable at that time. Outside basis differences in the Company's foreign subsidiaries including unremitted earnings and any related taxes are not material.