Texaco and Exxon to Fight $2-Billion IRS Tax Bill

Texaco Inc. and Exxon Corp. said the Internal Revenue Service is seeking more than $2 billion in taxes from 1979 to 1982, when the companies purchased cheap oil from Saudi Arabia, published reports said today.

Texaco said Wednesday that the IRS claims that the oil company owes $1.79 billion in taxes from 1979 to 1981, when it sold oil to its affiliates at below-market value.

Exxon Corp. said the IRS has billed it $269 million for 1979 in connection with oil that the government of Saudi Arabia sold to Exxon and Texaco in a bid to stabilize the world crude market. Interest on the Exxon payments could double the amount of money the IRS seeks.

Exxon said it has filed a petition in the U.S. Tax Court in Washington over the IRS bill. Texaco said it also will fight the IRS claim.

Texaco and Exxon said that for three years the Saudis sold the oil cheaply on the condition that it be sold at $4 to $6 a barrel below market, the Wall Street Journal reported.

Texaco said the IRS is seeking $863 million in back taxes and $925 million in interest because it said Texaco should have charged the market price when it sold the oil to its affiliates, the New York Times said.

The refining operations, most of them overseas, reaped huge profits when they sold the end products.