The Internal Revenue Service (IRS) is trying, yet again, to hold Facebook accountable for tax obligations in the United States. If successful, the IRS could claim more than $9 billion dollars in tax payments. The most recent courtroom battle between the federal agency and the social media platform is just one in a series of battles around this issue that have been in the works for years, reaching back to transactions that took place in 2010.
What is the argument?
Facebook argues it was liable for tax obligations in Ireland, not the United States. The IRS counters that Facebook is, in actuality, a California company. As such, it should pay taxes in the U.S. However, Facebook supports its claim by pointing to the fact the business has a headquarters in Ireland.
Could this lead to a change in the law?
Tax experts have argued that if the United States wants to collect taxes in situations like the current Facebook controversy, it should have more general laws. Instead of the specifics that are now in place, they state the law should have a more general framework and should be adjusted to consider the spirit of a taxpayer’s actions.
Thus far, no official proposals that outline this type of a legal change are moving forward.
What does this mean for other businesses?
Even small businesses are wise to take note – the IRS is taking a close look at businesses and lawmakers may consider changes to tax law. There are many moving parts when it comes to compliance with tax law and a single misstep can result in an audit or allegations of wrongdoing, as currently faced by Facebook. Those who find themselves in a similar situation are wise to act to protect their business interests.