Massachusetts Hits Staples For $10 Million On Sham Interest Deductions

Staples has a sophisticated cash management system. Cash is stripped from subsidiaries and all bills are paid from a central account. I could see that there must be all sorts of operational advantages to that sort of system, but some bright bulbs in the Staples tax department or perhaps a consultant dreamed up another advantage of the cash management system (CMS). Instead of looking at it as the parent taking the money from the subsidiaries, let's look at it as the subsidiaries loaning to the parent. The interest income and expense going back and forth will wash out for federal income tax and GAAP financial statement purposes, but if it breaks right it will save state income tax - unless state revenue departments catch on.