The Supreme Court's decision to nix a wide swath of the Trump administration's tariffs comes with some big tax and transfer pricing questions for tax executives as companies battle to collect refunds from the government.
The court's 6-3 ruling sets up what would be a messy refund process, though the justices basically said nothing about it, leaving companies to take their claims to court.
If the refunds come in, businesses will have to figure out how to apportion funds across subsidiaries —sometimes across borders — without breaking transfer pricing rules, which govern the pricing of affiliate transactions and ultimately determine where taxes are owed.
The rules say related-party transfers must be priced as though they were done at arm’s length, in the open marketplace. Companies that don't do it right risk a tax agency audit.
On this episode of Talking Tax, Bloomberg Tax transfer pricing reporter Caleb Harshberger discusses the sticky tax and transfer pricing issues surrounding tariffs and the possibility of refunds.
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