248 Germany countries analyzing the same transaction. The difference in application and the view of the German tax authorities and tax courts became very obvious in a recent tax court decision 21 Here, the court used the gross margin of a transaction to unrelated suppliers to determine the arm's length gross margin for the transactions to the parent company f a German distribution company. The transaction between the unrelated parties amounted to 5 percent of the total products received by the distributor compared to 95 percent received from the parent company. Moreover, the German distributor bore inventory risk for the products purchased from related parties. The German distributor did not bear any inventory risk for its parents products. In the United States, one would most probably dismiss the applicability of such a transactional method due to a lack of comparability and would likely rely on a profit-oriented method instead The ruling by the court in the aforementioned case is in line with the view of the jerman tax administration. The tax authorities require that taxpayers make appro- priate adjustments and apply a transactional method rather than by default apply profit-oriented method, which are generally not accepted by the German tax au- thorities. The taxpayer of course should make sure, that its analysis generates rea tend to disregard transactions if a distributor incurs losses for several years, 22 0Fs sonable results. As described earlier, the Federal Tax Court as well as tax aud (b) Contractual Relationship as a Starting point The starting point for the determination of an arms length price is a comparison of the terms and conditions agreed to by the related parties, unless the actual con duct of the parties deviates from the stated agreements. This principle is essential to avoid the risk of double taxation. If a country did not follow this principle, a multinational enterprise might be exposed to a risk of double taxation, since both tax investigators might then substitute the actual transactions by one that best suits its respective fiscal interest. Moreover, it would be unclear in that situation what conditions should replace the conditions agreed to even if these are unusual. In the face of a constantly chan ing bu ole to deter what is usually agreed to or to determine if third parties had actually agreed to the same conditions. The German tax authorities basically accept the above- mentioned principle. The company must determine an arms length price, based on the conditions agreed to by the parties The tax administration investigates Lower Tax Court of Dusseldorf, December 8, 1999, DStRE 1999, 792: for a detailed discussion, see Kuck hoff/Schreiber, IStR 1999, p. 515; Kroppen/Eigelshoven, IWB Fach 3, Gruppe 1, pp. 1594 ff 22See Federal Tax Court, February 17, 1993, BStB1 I 1993, p.457 2See also OECD Guidelines 3 1.36; Sieker, ITPJ 1998, P.20 2Kroppen, in: Becker/Kroppen, Handbuch Internationale Verrechnungspreise, n wy