Do they have COGS? If so, what would be the normal costs to include? It's a services only firm.
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Generally no. But sub contractor work could be COGS.This post is for discussion purposes only and should be verified with other sources before actual use.
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"It is worth noting that while any kind of business records revenue for its sales or services, COGS is an expense only to those businesses that sell inventory. Service businesses do not have COGS because they do not sell products (inventory). A business that sells both services and products will record COGS for the products it sells." [Introduction to Accounting Principles]
Pub 538:
"Items Included in Inventory
Your inventory should include all of the following.
• Merchandise or stock in trade.
• Raw materials.
• Work in process.
• Finished products.
• Supplies that physically become a part of the item in-tended for sale."
It's pretty clear that inventory (and therefore COGS) refers exclusively to tangible items. I realize that for book purposes, some people show subcontractor costs as COGS, but that is not a valid presentation for income tax purposes.
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