Are taxpayers required to categorize inventory at the item level? Or, can categorization be performed based on higher level groupings?
The Regulations state that each individual inventory item must be categorized to the most detailed BLS category of the selected BLS table that contains that item. If a taxpayer has grouping or summary information available within its inventory, it is possible that this level of information may be acceptable for purposes of assigning the appropriate BLS categories to inventory. Items for consideration when making this determination are 1) is the description for the group or summary descriptive enough to assign the most detailed BLS category and 2) is the group or summary description truly reflective of every single detailed inventory item within that group? If the answer to each of these questions is ‘yes’, then it would be possible to assign the BLS categories to the taxpayers inventory at the group or summary level.
