The Internal Revenue Service wanted Amazon to pay more than $1.5 billion over transactions involving a Luxembourg unit.
Judge Albert Lauber of the US Tax Court rejected a variety of IRS arguments, and found that on several occasions the agency abused its discretion, or acted arbitrarily or capriciously.
The case involved transactions in 2005 and 2006, and could boost its federal tax bill by $1.5 billion plus interest. It also said a loss could add “significant” tax liabilities in later years.
Amazon made just $2.37 billion of profit in 2016, four times what it made in the four prior years combined, on revenue of $136 billion.
In one of the more pot calling the kettle black moves of the US elections, Donald (Prince of Orange) Trump claimed that Amazon did not pay enough taxes and accusing it on Fox News of “getting away with murder tax-wise”.
The IRS case involved “transfer pricing,” which arises when different units of multinational companies transact with each other.
Amazon argued that the IRS overestimated the value of “intangible” assets, such as software and trademarks, it had transferred to a Luxembourg unit, Amazon Europe Holding Technologies SCS.
Amazon did this through a plan called “Project Goldcrest,” to have the “vast bulk” of income from its European businesses taxed in Luxembourg at a “very low rate”.
Amazon has said it may face more tax bills in Europe if authorities in Brussels conclude that prior rulings by Luxembourg tax officials amounted to improper “state aid” that gave it an unfair advantage over rivals.