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January 16, 2013

Amazon takes on US IT department over $234m tax deficiency

Amazon argued that the IRS is misjudging the value of its 'intangible property'

By CBR Staff Writer

Amazon is fighting the US Internal Revenue Service (IRS) over a $234m tax bill, challenging the agency’s tax calculations for cash transfers between the parent firm and its European subsidiaries.

Filed on 28 December 2012 in US Tax Court in Washington, the case centers around the pricing of payments among company subsidiaries.

According to Reuters, the case has implications for other technology firms with software assets that may be complex to evaluate for tax purposes.

In November 2012, the IRS notified Amazon of the tax deficiency, The agency is also challenging taxes on Amazon’s net operating losses.

Amazon said the IRS was misjuding the value of its subsidiaries, however, the IRS argued that Amazon’s European subsidiaries had made taxable payments to its US parent firm on a low-dollar estimate.

According to Amazon, the agency calculated the transfer pricing taxes through an estimate method that was upturned in a 2009 court decision that concerned Veritas Software.

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