Amazon fights $234 million tax liability in Tax Court

Tue Jan 15, 2013 5:06pm EST
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By Patrick Temple-West

WASHINGTON (Reuters) - Online retailer Amazon Inc is fighting the U.S. Internal Revenue Service over a $234 million international tax bill, a dispute similar to others in which the agency has struggled to collect corporate taxes.

The case, filed on December 28 in U.S. Tax Court in Washington, has implications for other technology companies with software assets that may prove difficult to value for tax purposes.

The IRS informed Amazon in November 2012 of what the agency said were unpaid taxes for 2005 and 2006. The agency also is contesting tax deductions Amazon claimed on its net operating losses, among other issues, according to the court filing.

Amazon first publicly disclosed in April 2011 that it faces $1.5 billion in additional federal taxes over a seven-year period, beginning in 2005, according to a Securities and Exchange Commission filing.

Amazon and the IRS declined to comment on Tuesday. A lawyer with Baker & McKenzie LLP, which is representing Amazon, could not be reached for comment.

The case involves a "transfer pricing" tax dispute.

Multinational corporations value goods and services moving across international borders from one corporate unit to another. These cash transfers are frequently managed to reduce corporations' global tax costs.

Amazon argues that the IRS is overestimating the value of Amazon's "intangible property," which includes computer software, trademarks and marketing assets, according to the court filing.   Continued...

A zoomed illustration image of a man looking at a computer monitor showing the logo of Amazon is seen in Vienna November 26, 2012. REUTERS/Leonhard Foeger