Texas Cost of Goods Sold Includes Additional Grocery Department Labor Amounts

DALLAS, May 23, 2017 /PRNewswire/ -- The Texas Comptroller's Decision in Hearing Nos. 112,139; 112,140; and 112,141 granted the taxpayer's request to increase the allocated labor costs included in the audit of the taxpayer's cost of goods sold (COGS). Costs allowed in Tax Code Section 171.1012(c) include the direct costs of acquiring or producing goods and additional costs that are allowed in subsection (d) in relation to the entity's goods. The Decision noted that wholesalers and retailers can include in COGS costs incurred from the point of acquisition of the goods through the point of putting the goods on display for sale. Costs after the point the goods are displayed for sale are considered non-allowed selling costs disallowed by Tax Code Section 171.1012(e).

The evidence established how the deli and meat market department personnel must trim/grind the raw meat or slice the blocks of cheese before the goods are available for sale. In addition, the goods have to be weighed and labeled before they can be sold. Similarly, pharmacists must prepare and label prescription medicines before they are available for sale. Therefore, these costs are allowable COGS.

The workforce management labor studies provided by the taxpayer were certainly helpful in establishing the portion of allowable labor costs, but they are not required for a taxpayer to prove up their case, as was affirmed in Comptroller's Decision Nos. 111,428; 111,429; 111,430; and 111,431. Instead, "the allocation of costs between production and nonproduction should be made on a reasonable basis."  Id.

About Ryan
Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a five-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.

TECHNICAL INFORMATION CONTACTS:

Eric L. Stein
Principal
Ryan
512.476.0022
[email protected]

Sandi Farquharson
Director
Ryan
512.476.0022
[email protected]

SOURCE Ryan

Related Links

http://www.ryan.com