Multinational Alcoholic Beverages Company

State Case Study

This company is a global leader in the manufacturing and distribution of alcoholic beverages. As a British public company, they are based in London and traded on the London Stock Exchange and the New York Stock Exchange. Until recently, they were the world’s largest distiller, with over 100 manufacturing plants in 30 countries with products in over 180 countries. North America is their largest market, accounting for a third of their sales and 45% of the company’s profits.

The Problem

The beverage company was under audit in the states of California, New York, and Illinois and felt it would be prudent to bring in a consulting firm with strong experience in these states to see if anything could be recovered. After working with the Big Four for many years, they didn’t expect much recovery but saw no harm because of the contingency arrangement Ashland offered.

The Solution

Ashland brought a five-person Single State Specialist team to the company’s main US office. Each of the review team members had specific state experience in only their review state, most with 20-30 years as an auditor for their state. They conducted a four-day on-site review of the returns, workpapers, and audit schedules. There were several favorable adjustments identified, and on the afternoon of the fourth day, Ashland presented their issues to the beverage company’s tax team and discussed each one in depth. We defined a tax benefit amount for each issue for the company. After the discussion at the presentation and in follow-up conference calls, Ashland and the beverage company developed a strategy on the timing and method of presenting the tax issues to each taxing jurisdiction. We determined that each issue would be presented to all auditors handling the ongoing audits. Ashland prepared the refund requests and supporting schedules and, at the direction of the beverage company, presented them to the auditors.

I liked the fact that they had people who had been auditors who were on the other side of the process. They were experienced people doing the reviews for me.

Tax Director State and Local Tax

North American Division of a Multinational Alcoholic Beverages Company

The Results

In California, the company’s audit assessment was reduced by $530,000 due to an income adjustment that Ashland identified and successfully defended. Ashland identified income adjustments with a tax effect of over $2,000,000 that were presented to the New York field auditor. The auditor approved the adjustments and incorporated them into the audit. In Illinois, Ashland identified apportionment issues that reduced the tax in all open years. This adjustment reduced the tax owed by almost $2,000,000. These were presented to the auditor and they were approved.

They came up with ideas and issues that no one else had come up with.

Tax Director State and Local Tax

North American Division of a Multinational Alcoholic Beverages Company