Tax Man says Amazon Owes US $234 Million

January 18, 2013—Doesn’t matter how many new fulfillment centers Amazon opens up, they can’t avoid paying the tax man. 

In November of 2012, Amazon received a notice of unpaid international taxes in the amount of $234 million from 2005-2006. While unpaid taxes is nothing new to Amazon, the online marketplace believes the IRS is overestimating the balance and will contend it in court.

The Internal Tax Revenue says tax payments made from Amazon’s units in Europe to the parent US Company were too low and the agency is also contesting tax deductions Amazon claimed on its net operating losses. According to the court filing, Amazon is arguing the IRS is overestimating the value of Amazon’s “tangible property,” which includes computer software, trademarks and marketing assets. Amazon also faces $1.5 billion in additional federal taxes over a seven-year period beginning in 2005.

Many corporations value goods and services moving across international borders from one corporate unit to another to reduce corporations’ global tax costs.  In 2010, lawyers for Veritas contended the IRS method of determining Veritas taxes owed was “arbitrary, capricious, and unreasonable.” The US Tax Court soon agreed, and the IRS backed off their claim. Neal Kochman, a tax lawyer with Caplin & Drysdale who is not involved in the case said, “From Amazon’s perspective, you’d be crazy not to litigate given what a sound defeat the IRS took in Veritas,” Although Amazon is not required to pay the bill until the outcome of any court decision is made, the case could eventually be settled out of court.

Amazon and the IRS declined to comment on Tuesday and a lawyer with Baker & McKenzie LLP, which is representing Amazon, could not be reached for comment. Amazon is also facing tax troubles in France after receiving a $252 million demand from French tax authorities last year. 

Is Amazon the Wesley Snipes of paying taxes?


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