Taxation and State Taxation -- 2006
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U.S. Smokeless Tobacco Brands Inc. v. Washington
(Washington State Supreme Court)
Tax valuation of products exchanged by related entities
The NAM joined with the Council on State Taxation (COST) in an amicus brief 12/2/05 urging the Washington Supreme Court to review a lower court tax decision that undermines the fair and uniform application of accepted valuation principles. The case involves the how to value for excise tax purposes goods that are exchanged between related entities. The company presented evidence that the fair market value of the goods is the correct measure of value, and presented evidence of that value using standard arm’s-length valuation procedures under Section 482 of the Internal Revenue Code. The Washington court rejected that evidence as inadequate, without saying why or suggesting an alternative valuation method. Our brief argues for a uniform standard for testing affiliate transactions.
The Washington Supreme Court granted review and held arguments in the fall of 2006. The case was settled without opinion at the end of the year.
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