Coca-Cola revealed that the IRS has notified the company of back taxes, accrued interest, and penalties, amounting to $3.3 billion, from 2007-2009.
The company challenges the claim, saying that the disagreement is in how much it's liable to report as taxable income in the U.S., in relation with licensing that allows its foreign affiliates to sell products like soft drink concentrates to bottlers overseas, according to USA Today.
The soda giant has passed a regulatory filing, expressing its stand that the assessments by the IRS are without merit, and that they are ready to pursue and face all legalities needed to clear the issue.
Also in the filing, Coke said: "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," Business Insider reports.
Despite the company's readiness to face the legal battle, Coca-Cola is aware of the financial impact of the situation, though it cannot yet fully estimate how big the damage would be, moving forward.
"The ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the assessed tax and deficiency interest could have a material adverse impact on the company's financial position, results of operations or cash flows," the company said in a statement, according to The Inquisitr.
