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Correspondence Letter

 Writer’s Direct Number: (425) 313-8203

 Fax: (425) 313-6593

 March 20, 2007

 BY TELECOPIER AND COURIER

 Michael Moran

 Accounting Branch Chief

 United States Securities and Exchange Commission

 Mail Stop 3561

 Washington, D.C. 20549

Re:
Costco Wholesale Corp. — Form 10-K for the Fiscal Year Ended September 3, 2006, filed November 17, 2006, and Form 10-Q for the Fiscal Quarter Ended November 26,
2006, filed December 22, 2006 — File No. 0-20355

 Dear Mr. Moran:

 In response to your letter of March 6, please see the text below, which corresponds to the numbered paragraphs in your letter.

 Form 10-K for the Fiscal Year Ended September 3, 2006

 General

1.
Where a comment below requests additional disclosures to be included, please show us in your supplemental response what the revised disclosures will look like. These additional
disclosures should be included in your future filings.

 Response:

 To the extent requested, revised disclosures will be reflected in future filings.

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

 Consolidated Financial Statements

 Notes to Consolidated Financial Statements

 Note 11 – Staff Accounting Bulletin No. 108, page 71

 2.

 We have read your response to comment 10 of our letter dated January 26, 2007. The SAB 108 transition provisions
provide for a cumulative effect adjustment for errors determined to be immaterial in prior periods under an issuer’s previous and properly applied methodology, and after considering appropriate qualitative factors, but that are material to
those periods based on the guidance of SAB 108. SAB 99 notes that a materiality evaluation must be based on all relevant quantitative and qualitative factors. Based on your facts and circumstances, and given the subject matter of the review, it is
unclear whether the use of the one-time cumulative effect adjustment permitted by SAB is appropriate. Please provide your annual SAB 99 materiality analysis explaining how you determined that all of the errors, not just those related to misdating of
stock option grants, related to each prior period were immaterial on both a quantitative and qualitative basis. Please ensure your response addresses all of the qualitative factors outlined in SAB 99 and any other relevant qualitative factors.
Please also provide additional detail with respect to the adjustments made to the employee grants after the grant date.1

 Response:

The
Company believes that its use of a cumulative one-time adjustment under SAB 108 was appropriate.

 In assessing materiality, we utilized SEC Staff Accounting Bulletin (SAB) No. 99, Topic 1-Letter M (Materiality), including its reference to 5% as a
basis for a preliminary quantitative assessment of materiality. We also considered the listed qualitative factors. The qualitative and quantitative factors are discussed below.

 1

 Please note that the last sentence of this paragraph was revised from the letter we received based on
the advice of Mr. Hobbs.

 2

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

A.
Qualitative Materiality

 Stock-option adjustment.
The Special Committee of the Board of Directors specifically concluded, after considering the requirements of SAB 99, that the errors associated with the stock-option adjustment were not material. It is unlikely that the judgment of investors who
relied on financial statements containing any misstatements arising from unrecorded incremental, non-cash option expense would have been changed or influenced had such expense been reported. As noted below, the estimated compensation expense
(separately and in the aggregate) was very low as a percentage of earnings. The additional option expense in any affected period would not have changed income into a loss. The misstatements did not mask a change in earnings or a failure to meet
analysts’ expectations. Costco’s earnings were increasing during the years in question, and would have increased inclusive of the adjustments made to reflect additional options-related expense. The Company earned 61 cents per share in
fiscal 1996, which increased to $1.53 per share in fiscal 2003. Thus, the effect of the misstatements did not change overall trends in operating results. (See also the graph below.) In addition, management’s compensation arrangements unrelated
to options were not significantly affected by the misstatements. The options program applied broadly across the Company’s workforce and was not focused on a particular business segment that played a unique or significant role in Costco’s
operations. The Special Committee of the Board of Directors found no intentional deviation from generally accepted accounting principles and no reason to believe that management manipulated grants to improve reported financial results. (Notably, the
Company voluntarily began expensing options in fiscal 2003, three years prior to the time it would have been required to do so under FAS 123.) The misstatements did not involve concealment of any unlawful transaction, or affect Costco’s
compliance with any regulatory requirements, loan covenants, or contractual requirements. With respect to the requirements of Sections 13(b)(2)-(7) of the Securities Exchange Act of 1934, any record-keeping issues that contributed to the
identified deficiencies appear to have been isolated to the accounting for compensation expense relating to

 3

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

option grants. Those issues have been corrected to prevent recurrence and have been disclosed by the Company.

 Deferred Tax Liability Adjustment. The Company reduced (in the amount of $31.67 million) its beginning retained earnings for fiscal 2006 for a
historical misstatement in deferred taxes related to unreconciled differences in the detailed records supporting the deferred tax liability for depreciation of property and equipment. This error, discovered in fiscal 2005, involved an overstatement
of the tax basis of our long-lived assets and a corresponding understatement of the Company’s net deferred tax liability. Prior to fiscal 2003, our determination of deferred taxes did not involve a complete reconciliation of the aggregate tax
and book basis of all of our long-lived assets. Rather, we relied upon a reconciliation of the change in basis from one year to the next. Other than isolating the error to a point prior to fiscal year 2003, the Company has not been able to ascertain
in which years the events occurred that gave rise to the overstatement of the tax basis. It has no reason to believe, however, that the error appeared completely or disproportionately within the period 1996-2002. Because this item related to a
timing difference between the tax and book basis of certain assets, we believe that the misstatement did not affect the metrics that management and investors have considered most important in evaluating the financial performance of the Company,
including sales, gross margin, selling, general and administrative expenses, pre-tax income, inventory levels, or inventory losses. Based on available evidence management does not believe that the misstatement was intentional, masked any change in
earnings or other trends, hid a failure to meet consensus earnings expectations, changed a loss into income, uniquely concerned a key business segment, affected compliance with regulatory requirements or Company contracts (including loan covenants),
concealed an unlawful transaction, or increased management’s compensation.

 4

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

 Accounting for Reinsurance Agreements. The Company increased (in the amount of $10.04 million)
its beginning retained earnings for fiscal 2006 related to a correction in the historical accounting treatment of certain finite risk arrangements. Because of the limited amount of risk transfer included in the agreements, historical premium
payments should have been accounted for as a deposit (asset) rather than expensed over the policy term. The misstatement in question affected the years 1995 through and including fiscal 2004 (the treatment was corrected in fiscal 2005). In the
aggregate, the misstatement had the effect of lowering income by $16 million (pre-tax) for the periods 1995 through 2004. It is unlikely that the judgment of investors who relied on financial statements containing any misstatements arising
from the recording of this item as an expense rather than a deposit would have been changed. The reduction in insurance expense and interest income in any affected period due to the misstatement did not change income into a loss or vice versa or
mask a change in earnings or a failure to meet analysts’ expectations. Management’s compensation was not increased as a result of the misstatement, because the misstatement lowered pre-tax income. The misstatements did not involve
concealment of any unlawful transaction, or affect Costco’s compliance with any regulatory requirements, loan covenants, or contractual requirements, or uniquely concerned a key business segment. There was no intentional misstatement –
simply an error of interpretation in applying accounting principles to contracts of insurance.

B.
Quantitative Materiality

 Please note that the aggregate
effects of the SAB 108 items were reported in note 11 of the financial statements for fiscal 2006, and thus investors were able to evaluate not just the quantitative impacts of the adjustments related to stock options but also the quantitative
impacts of the other two adjustments. Note 11 shows that the cumulative effect of the adjustments beyond the option adjustments were modest:

Cumulative Effect as of August 29, 2005

Stock option
grant
practices

Income tax
reserve for
excess
compensation

Deposit
accounting

Deferred
taxes

Total

 Deferred income taxes and other current assets

$
—

$
—

$
16,427

$
—

$
16,427

 Other current liabilities

—

(1,701
)

—

—

(1,701
)

 Deferred income taxes and other liabilities

31,480

—

(6,383
)

(31,667
)

(6,570
)

 Additional paid-in-capital

(147,637
)

—

—

—

(147,637
)

 Retained earnings

116,157

1,701

(10,044
)

31,667

139,481

$
—

$
—

$
—

$
—

$
—

 5

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

 In addition, below we show for fiscal years 1995 through and
including 2005 the income-statement effects each year of the combined stock-option and deposit accounting adjustments.2

 2

 The deferred tax liability adjustment is not reflected for the reason explained above. If the deferred
tax liability adjustment were reflected in fiscal 2005 (the year in which the error was discovered), its impact would not have been material – the adjustment of $31.7 million would have represented less than 3% of net income.

 6

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

 The supporting detail is in the following table:

 Fiscal Year

Net Income As
Reported *

Stock Option
(net of tax)

Deposit
Accounting
(net of tax)

Adjusted
Net Income

Cumulative Errors
as a % of Reported
Net Income

 1995

$
217,241

$
—

$
194

$
217,435

0.09
%

 1996

248,793

(8
)

837

249,622

0.33
%

 1997

312,197

(1,030
)

1,000

312,167

-0.01
%

 1998

459,842

(5,128
)

1,150

455,864

-0.86
%

 1999

515,321

(19,087
)

1,243

497,477

-3.46
%

 2000

631,437

(33,124
)

1,239

599,552

-5.05
%

 2001

602,089

(23,432
)

1,182

579,838

-3.70
%

 2002

699,983

(14,872
)

856

685,967

-2.00
%

 2003

721,000

(9,092
)

1,195

713,103

-1.10
%

 2004

882,393

(6,430
)

1,150

877,113

-0.60
%

 2005

1,063,092

(3,954
)

—

1,059,138

-0.37
%

 Total

$
6,353,388

$
(116,157
)

$
10,044

$
6,247,275

*
Income for fiscal 1995 excludes loss from discontinued operations; fiscal 1999 excludes cumulative effect of accounting change

 The stock option adjustment in the pro forma presentation is based on a graded-vesting method of recognizing compensation expense. (This was the approach
adopted by the Special Committee in its analysis.) The Company’s pro forma FAS 123 footnote disclosures prior to fiscal 2003 were based upon a graded-vesting method. Upon adoption of the fair-value based method of accounting for stock options,
effective September 2, 2002, the Company adopted the straight-line method. Previously, the Company had not adopted an attribution method under APB 25, as historically no stock-based compensation expense was recorded under APB 25. The adjustment
thus could have been based upon either attribution method. Consistent with the approach of the Special Committee, the presentation above uses the graded-vesting method for its analysis. Had the straight-line method been used, the impact on net
income in fiscal 2000, the peak year in the pro-forma table below, would have been lower (by 18 basis points), while other years would not have been materially affected.

 Historically, we followed the “rollover” method of assessing the materiality of prior year misstatements, which included consideration of all relevant quantitative and qualitative factors. When evaluating
these misstatements under the dual method prescribed by SAB 108, we concluded that the cumulative effect of the

 7

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

initial application should be reported in the carrying amounts of assets, liabilities and equity as of the beginning of fiscal 2006, and the offsetting
adjustment should be made to the opening balance of retained earnings, with appropriate disclosure regarding the nature and amount of each individual error being corrected in the cumulative adjustment.

 With “respect to the adjustments made to the employee grants after the grant date,” in December 2006 the Company upwardly adjusted the strike
price of certain options held by US taxpayers that potentially were subject to adverse tax consequences under section 409A of the Internal Revenue Code. For those options that were unvested at December 31, 2004, and remained outstanding at the
date of the repricing, the Company repriced the options and paid employees the aggregate amount of the increased prices in 2007. Below are additional details with respect to the adjustments made to these options, including: (1) the grant dates
affected; (2) the number of options repriced; (3) the original and revised strike price; and (4) the cash payment per share made to nearly all employees.

 Grant Date

Options
Repriced

Original
Strike Price

Revised
Strike Price

Cash
Payment
Made 1

Total Cash
Payment

 03/13/00

567,719

$
43.00

$
49.81

$
6.8125

$
3,642,773

 12/01/00

56,615

$
32.63

$
36.44

$
3.8125

$
215,845

 04/24/01

1,293,569

$
34.28

$
34.74

$
0.4600

$
564,682

 10/09/01

201,264

$
33.54

$
42.41

$
8.8700

$
1,785,212

 04/02/02

2,195,402

$
38.79

$
39.25

$
0.4600

$
964,345

 04/01/03

3,593,633

$
30.41

$
33.75

$
3.3400

$
11,561,854

7,908,202

$
18,734,711

 1

 Per share

 8

 Michael Moran, Accounting Branch Chief

 United States Securities and Exchange Commission

 March 20, 2007

 Form 10-Q for the Fiscal Quarter Ended November 26, 2006

Item 1.
Financial Statements

 Notes to Condensed Consolidated Financial
Statements

 Note 8. Subsequent Event, page 15

3.
We have read your response to comment 11 of our letter dated January 26, 2007 regarding your estimate of an additional $70 million pre-tax charge for adverse employee tax
consequences arising from the misdating of stock option grants. With respect to Internal Revenue Service Code Section 409A, it is our understanding that these regulations existed prior to the completion in October 2006 of