Time for Coca-Cola to sing in perfect harmony.
The Internal Revenue Service said on Friday that Coca-Cola owes them $3.3 billion.
In a filing with the SEC on Friday, Coke disclosed that on Thursday it had received a notice from the IRS seeking $3.3 billion, plus interest, after the service completed a five-year audit of its tax years running from 2007 to 2009.
In 2014, as a point of reference, Coke’s tax bill was $2.2 billion and its net income totaled $7.1 billion.
At issue is income received by the company in connection with licensing its products in foreign markets.
Basically, the IRS is asserting that Coke should recognize some of this income in the US, rather than overseas, and now wants Coke to pay up.
Coke disagrees, saying in the filing:
The Company has followed the same transfer pricing methodology for these licenses since the methodology was agreed with the IRS in a 1996 closing agreement that applied back to 1987. The closing agreement provides prospective penalty protection as long as the Company follows the prescribed methodology, and the Company has continued to abide by its terms for all subsequent years. The Company’s compliance with the closing agreement was audited and confirmed by the IRS in five successive audit cycles covering the subsequent 11 years through 2006, with the last audit concluding as recently as 2009.
And so basically Coke doesn’t think it did anything wrong. The filing also notes that the IRS has not asserted any penalties.