Amazon, Inc. & Subsidiaries v. Commissioner of Internal Revenue

Analysis Group was retained by counsel for Amazon.com, Inc. in a transfer pricing dispute with the IRS. In 2005, Amazon US (Amazon) entered into a cost sharing arrangement (CSA) with Amazon Europe Holding Technologies (AEHT), its Luxembourg subsidiary. As part of the CSA, AEHT paid for the right to use certain preexisting intangible assets in Europe, including the Amazon brand name. The IRS argued that the AEHT should have paid more for the transferred intangibles, resulting in a higher tax burden on Amazon.

An Analysis Group team that included Managing Principal Alan White and Manager Michael Schreck supported our affiliate, Professor Peter Golder, who used empirical data from technology-driven companies to estimate the useful life of Amazon’s brand intangibles at the time the CSA was agreed to in 2005. In contrast to the IRS expert, who determined that the intangibles had an infinite useful life, Professor Golder opined that their useful life was in the range of 11–16 years.

The US Tax Court held in Amazon’s favor, describing Professor Golder’s data-driven useful life analysis as “most persuasive.” The tax court’s decision was later upheld by the US Court of Appeals for the Ninth Circuit.

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