SALT Team member, Bill Backstrom, recently co-presented “Intercompany Transactions – State Challenges” at the COST Spring Audit and Income Tax Conference in Denver, Colorado.
The presentation focused on transactions between related parties and how they attract the attention of state taxing authorities. Tax authorities believe that such transactions provide opportunities for the “redistribution” of income. But supply chains and service companies are a common part of a corporate family.
The speakers discussed several weapons that states use to challenge intercompany transactions such as addbacks, throwbacks and throwouts, as well as transfer pricing studies. The speakers also discussed if the state has the authority to use these weapons and what the taxpayer’s best arguments are against their application.