Barnes Dennig Transfer Pricing After Tax Reform and COVID-19 120920 - BD | Page 25
BACK TO COCA-COLA
Tax Court Arguments
• By 2008 – 74 % of Coke ’ s revenues earned outside the US
• Coke and the IRS had an audit closing agreement in 1996 , which apportioned profits by formula
• Coke argued that subsidiaries did bear significant marketing risks and incurred substantial costs
• IRS - the 1996 closing agreement did not address goforward transfer pricing formulas
• IRS argued that independent bottlers bore marketing risks and Coke-US made the marketing decisions
• Why should low-risk contract suppliers earn excess profits ?