A recent U.S. Supreme Court ruling invalidating International Emergency Economic Powers Act (IEEPA) tariffs has opened the door for companies to claim billions of dollars in refunds, but the process will be complex. A refund system went live on April 20, and as companies prepare to file claims, PwC’s Chris Desmond unpacked potential tax and transfer pricing consequences.
While a large refund is welcome news for any company’s finance department, it’s also a tax event, Desmond explained. That’s because a refund results in “a reduction in the cost of goods sold,” which in turn increases a company’s taxable income. Companies need to have a plan to account for this, Desmond detailed in a recent PwC podcast and a conversation with Checkpoint.
His key recommendations to companies are to evaluate any third-party refund obligations and coordinate with transfer pricing teams — while documenting thoroughly in case of an audit.
Who Gets the Refund?
“You have to figure out what that gross versus net impact is,” said Desmond of forthcoming tariff refunds. Some companies may end up retaining less than their claimed tariff refund because they will need to pass along a portion to those that purchased their products. Others, however, may end up with an additional refund “on top” of their IEEPA number because they bought products from a company that will be passing along a portion of their refund, he explained.
To sort out who ultimately will retain refunds, Desmond suggests looking at supplier arrangements, and whether there is an agreement in place regarding tariffs.
Some companies clearly stated they were raising their prices due to tariffs, and their customers then paid those higher prices. When these companies get a tariff refund, Desmond suggested there could be an “obligation” to pass that refund along. Particularly where a tariff is included on an itemized invoice, “chances are there’s a fiduciary responsibility that if you do get a refund on the tariff, you then would need to pass that back to that customer,” he explained.
However, there are many gray areas, said Desmond. For example, some companies put out emails or other announcements that they were raising prices due to tariffs. “Does that now constitute an actual liability that that company has to then pay that back? It’s getting a little bit gray now,” Desmond told Checkpoint.
An “even grayer” circumstance is where a company made no announcement, but there’s a “perception” that they were passing along tariffs, said Desmond. “This is going to get very messy, and it’s really going to be up to companies to figure out where their potential liabilities are — to whom and how much.”
Timing and Transfer Pricing Concerns
The IEEPA tariffs “came into play February of 2025,” said Desmond, and they ran through February 2026 — a full 12 months. Tariffs will be “refunded by entry” and will have a date stamp “saying you’re getting refunded from an entry that occurred in June of 2025, or January of 2026,” he explained.
However, when companies get a tariff refund, it’s “probably going to cross different fiscal years,” said Desmond. For that reason, companies and their tax teams will need to think about the best way to treat these refunds. While this is not the first time tax teams have dealt with refunds, Desmond is still urging teams to think through key questions now. Those include: “What are the right procedures? How does that impact your tax return?”
Another consideration for multinational companies is transfer pricing. An estimated half of the potential refunds relate to intercompany transactions, said Desmond. If a U.S. entity is a limited-risk distributor, the question is: “Does that money need to get pushed back into where the full-fledged manufacturer, where the principal company, is?” This could require a transfer pricing adjustment or be part of a company’s “transfer pricing documentation exercise.”
And as companies make these transfer pricing determinations, Desmond warned they also should also be aware of potential customs impacts.
Documentation Is Key
Desmond offered several tips for companies applying for tariff refunds. However, his key recommendation is to assume refund claims and related tax structuring will be audited — and to maintain detailed documentation in preparation for such an audit.
He noted that per a recent U.S. Customs and Border Protection (CBP) webinar on the tariff refund submission process, companies will need to attest to the validity of their refund entries. That includes attesting to the “country of origin, classification, and all of these things that are begging detailed documentation.”
Beyond the tariff refund audit potential, Desmond highlighted the escalating number of active audits where CBP is seeking transfer pricing documentation in addition to customs documentation. In those audits, the government is asking: “Can you show us the support you have for the arms-length nature of the valuations that you have for the goods that you’ve imported, both from a customs and a transfer pricing perspective.”
It’s not “intuitive” for many companies, as they’re filing returns, to ensure they have proper documentation from a tax, customs, and transfer pricing perspective, said Desmond. As companies prepare to submit their refund claims, he stressed that “it’s not the speed that you can submit the refund; it’s the speed and accuracy that you can submit the refund to ensure that you’ve done the proper due diligence.”
