Photo/Illutration A Costco outlet in Chiba Prefecture (Asahi Shimbun file photo)

Authorities have rung up 1.5 billion yen ($9.9 million) bill for the Japanese arm of Costco Wholesale Corp. for failure to pay consumption taxes on improper duty-free sales and incorrect tax forms, according to sources.

The Tokyo Regional Taxation Bureau determined that some duty-free sales made at the retail giant’s Japanese outlets did not meet the exemption requirements for the 10 percent consumption tax.

These transactions, made during the five years to August 2022, included bulk purchases of home appliances by foreign customers that officials believe were made with the intent to resell.

Other purchases were made by foreigners who had been in Japan for more than six months and were therefore not eligible for the exemption on the consumption tax.

Costco Wholesale Japan Ltd., based in Kisarazu, Chiba Prefecture, was ordered to pay consumption taxes of 300 million yen for those transactions.

The company was also ordered to pay an additional 1.1 billion yen in undeclared consumption taxes due to an error in its tax form calculations.

The error is a typical one made by inexperienced corporate accountants with insufficient knowledge of the consumption tax, according to Takashi Tsubaki, a tax accountant who previously worked as a tax bureau officer.

With a penalty for making an initial incorrect tax declaration also added, the company will have to pay a total of around 1.5 billion yen.

Costco Wholesale Japan was not immediately available for comment.

The company’s sales in Japan reached 570 billion yen in the fiscal year that ended in August 2022, according to a private research firm.

The U.S.-based members-only retailer operates 862 outlets worldwide, including 33 in Japan, serving more than 127 million member customers globally.

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