With the completion of a 5 year IRS tax audit, the agency has notified Coca-Cola that it owes $3.3 Billion in back taxes and interest following an IRS audit of tax years 2007-2009. The audit took five years to complete, and questions the licensing revenue Coke received from offshore sources.
Coke had booked that revenue in its offshore corporations, and the IRS’ notification has determined that the revenue should have been accounted for in Coke’s US corporate holdings. The “transfer pricing” issue has been hotly contested by Coca-Cola who says that the procedure for accounting of these sources of revenue was actually based upon an IRS determination back in 1996. The company further notes that the IRS itself has abided by this methodology in the five successive audits since the 1996 agreement, until this year.
Coke plans to pursue all “administrative and judicial” remedies available.
How can the IRS simply change the rules in the midst of an audit? Each audit is unique, and each auditor brings their own experience, judgment and experience to the table. The seasoned tax attorneys at Allen Barron are often in the same types of positions with the IRS requiring us to stand up to the agency on our client’s behalf based upon the IRS’ own tax codes, and standardized accounting principles.
This is a major reason why a US taxpayer or business owner should never attempt to communicate with the IRS manage an IRS audit on their own. If you have been contacted by the IRS for an audit, we invite you to contact us for a free and substantive consultation at 866-631-3470.