A US court mostly sided with tax authorities in a dispute with Coca-Cola over how the soda giant reports income from some overseas markets, according to a ruling this week.
The US Tax Court decision Wednesday largely upheld the Internal Revenue Service’s arguments, concluding that the agency “did not abuse (its) discretion” in the case.
The dispute centers on how Coca-Cola estimates income between 2007 and 2009 tied to licensed foreign manufacturing affiliates in Brazil, Ireland and some other countries that have lower tax rates than the US.
The IRS sent a notice to Coca-Cola in 2015 stating that the company owed potentially $3.3 billion in taxes over the three-year period, plus interest.
The IRS has argued that Coca-Cola insufficiently accounted for the value of the company’s intangible property such as its brand, which are maintained by the parent company.
“The intangible property is extremely valuable,” the court wrote in summarizing the IRS stance. “Coca-Cola is the best known brand in the world, recognized by more of the planet’s 7.7 billion inhabitants than another English word but ‘OK.'”
Coca-Cola maintained that the company followed the methodology agreed in 1996. The soda giant had argued that the IRS wasn’t taking into account overseas marketing costs when calculating the tax liability.
Coca-Cola said it was “disappointed” with the decision and was weighing an appeal. “We intend to vigorously defend our position,” the company said.
Shares of Coca-Cola dipped 0.2 percent to $52.53 in early-afternoon trading.