Texas - Proposed rule change addresses COGS deduction for labor and service costs, reflects election policy change

March 2013


The Texas Comptroller of Public Accounts proposed to amend its cost of goods sold (COGS) rule to allow taxpayers to include as COGS both direct labor costs and those indirect labor costs, other than service costs, that are subject to capitalization under Treasury Regulations interpreting IRC §263A. Notably, the amendments would allow taxpayers that applied a more limited approach as to what labor costs are deductible to recalculate their deduction and consider filing for a refund. The proposed amendments also address the deduction for indirect or administrative overhead costs and reflect recent policy changes allowing taxpayers to change their computation method election on an amended return. [34 TAC §3.588, Texas Register, Volume 38. No. 11, 3/15/13]

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