Amazon Wins $1.5 Billion Tax Dispute With IRS

Amazon.com on Thursday won more than $1.5 billion in a tax dispute with the Internal Revenue Service over transactions involving a Luxembourg unit more than a decade ago. The IRS case involved "transfer pricing," which arises when different units of multinational companies transact with each other. Amazon argued that the IRS overestimated the value of "intangible" assets, such as software and trademarks that it had transferred to a Luxembourg unit called Amazon Europe Holding Technologies SCS. The world's largest online retailer has said the case involved transactions in 2005 and 2006, and could boost its federal tax bill by $1.5 billion plus interest. Amazon also said a loss could add "significant" tax liabilities in later years. Judge Albert Lauber of the U.S. Tax Court rejected a variety of IRS arguments, and found that on several occasions the agency abused its discretion, or acted arbitrarily or capriciously.

Total Retail’s Take: While this ruling is good news for Amazon, it's also good news for other retailers — and businesses in general — that have wholly-owned subsidiaries overseas. The ruling basically reaffirms the fact that tax law permits wholly-owned subsidiaries to license intellectual property. The news may not be welcomed by President Trump, however. Before entering the White House, he contended that Amazon failed to pay enough taxes.