Monday, June 18, 2012

Cost of Goods Sold


The following are types of expenses that go into figuring the cost of goods sold.

·         The cost of products or raw materials, including freight
·         Storage
·         Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
·         Factory overhead

Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.

This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million.

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