New York court says Disney owes $1.3 million in taxes
A midlevel state appeals court ruled Thursday that Disney Enterprises Inc. owes New York state $1.3 million corporate franchise taxes after an audit by the state Department of Taxation and Finance.
Disney Enterprises, part of The Walt Disney Co., had argued that the state should not have included income from Buena Vista Home Video sales in the formula it used to determine a company's tax liability in the state from 1990 to 1995.
Lawyers for the company argued that federal law prohibits states from collecting income tax on any company whose only business activities in that state consist of soliciting orders for interstate sales.
The Appellate Division of State Supreme Court in Albany however, said that the video company is part of a larger group of companies and its sales should be included when determining the true tax burden Disney has in New York.
By including Buena Vista's New York sales receipts "the department is not imposing a tax" the court said. "It is attempting to best measure the combined group's taxable in-state activities by use of a formula."
The court also rejected the way Disney valued its film library in the formula determining its tax liability.
Paul Frankel, a lawyer representing Disney, did not immediately return a call for comment.
The Burbank, Calif.-based company last month reported fiscal first-quarter earnings of $1.7 billion, or 79 cents per share, for the three months ended Dec. 30.