Coca-Cola Says IRS Demanding $3.3 Billion in Taxes

A Coca-Cola statement released on Friday, said the company was planning to pursue all its administrative as well as judicial remedies to resolve such an issue.

In a filing with the Securities and Exchange Commission, Coca-Cola said it has been following the same methodology for determining its taxable USA income for almost 30 years.

The company challenges the claim, saying that the disagreement is in how much it’s liable to report as taxable income in the US , in relation with licensing that allows its foreign affiliates to sell products like soft drink concentrates to bottlers overseas, according to USA Today.

In that system, companies have an incentive to book the income in countries with low taxes and leave 57% of its revenue outside the U.S.

Typically, Willens said, the cases are settled for a fraction of the amount of the assessment.

“They hardly ever get to court, because neither party wants to experience the hazards of litigation”, Willens said. They are not required to pay the taxes until the money is repatriated.

But Coca-Cola said it had followed the accounting principles for transfer pricing – how earnings are accrued between branches of a company – established in an agreement with the IRS in 1996.

Coca-Cola seeks to meet with the IRS’s chief counsel and is anticipating challenging the IRS’s notice via a petition in the U.S. Tax Court.

Coca-Cola, based in Atlanta, said that it believes the assessments from the IRS are without merit.

Coke said it is not being assessed penalties on the disputed back taxes.

“The company has continued to abide by its terms for all subsequent years”, it said.

“Under US law, companies owe the IRS up to 35 percent on profits they earn around the world”.

Coke had profit of $7.1 billion in 2014.