An IRS audit examining nearly a decade of Microsoft financial reporting has found that the company owes $28.9 billion in tax for 2004 to 2013, plus penalties and interest, Microsoft said Tuesday afternoon.
The determination is not final, and the company says it plans to appeal. The appeals process is expected to take several years, and the IRS finding is not expected to reflect Microsoft’s upcoming quarterly report.
“We believe we have always followed the IRS’ rules and paid the taxes we owe in the U.S. and around the world,” wrote Daniel Goff, Microsoft’s corporate vice president for worldwide tax and customs, in a post disclosing the preliminary IRS finding. “Microsoft historically has been one of the top U.S. corporate income taxpayers. Since 2004, we have paid over $67 billion in taxes to the U.S.”
Goff noted in the post that taxes paid by Microsoft under the Tax Cuts and Jobs Act could reduced the additional tax owed by the company by up to $10 billion.
To put the figures in context, Microsoft’s total net income from fiscal year 2004 to fiscal year 2013 was $198.7 billion, according to its historical financial results.
As described in the post, the disagreement involves the mechanism known as transfer pricing, related to the way Microsoft allocated profits among different companies and jurisdictions.
Seattle-based e-commerce giant Amazon faced a similar tax dispute but defeated the IRS in court in 2017.