What is a “mixed transaction” and does it qualify for a cost of goods sold deduction?
TTC 171.1012 provides that the only taxable entities that are eligible to use COGS in computing margin are those entities that sell real or tangible personal property in the ordinary course of business. This section of the code goes on to confirm that the performance of a service is not considered the sale of tangible personal property. However, we did include a provision in Rule 3.588(c)(6) that reads as follows: “Mixed transactions. If a transaction contains elements of both a sale of tangible personal property and a service, a taxable entity may only subtract as cost of goods sold the costs otherwise allowed by this section in relation to the tangible personal property sold.” Examples: 1. Oil Change Services – a taxable entity providing an oil change may include in its COGS computation only the cost of the oil filter and oil that is that is included in the performance of the service. No labor costs would be included as part of COGS. 2. Crop Duster – a taxable entity that provides cr
TTC 171.1012 provides that the only taxable entities that are eligible to use COGS in computing margin are those entities that sell real or tangible personal property in the ordinary course of business. This section of the code goes on to confirm that the performance of a service is not considered the sale of tangible personal property. However, we did include a provision in Rule 3.588(c)(6) that reads as follows: “Mixed transactions. If a transaction contains elements of both a sale of tangible personal property and a service, a taxable entity may only subtract as cost of goods sold the costs otherwise allowed by this section in relation to the tangible personal property sold.” Examples: • Oil Change Services – a taxable entity providing an oil change may include in its COGS computation only the cost of the oil filter and oil that is that is included in the performance of the service. No labor costs would be included as part of COGS. • Crop Duster – a taxable entity that provides crop
