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LKTPL
March 4, 2023
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COGS or Expenses for Service based business

  • March 4, 2023
  • 2 replies
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I own a picnic company. I purchase the materials & supplies needed to create the picnic (such as table, decor for table, tableware, etc.) I reuse these items over and over for each picnic I do. I’m not selling an actual item to my customer just the service of me setting everything up for them. They are basically renting my picnic set up. Would these items I use be categorized as COGS or a regular Supplies & Materials expense? 

Best answer by Rustler

When you file income tax COGS is related to the cost of items held in inventory that you sell

 

Use materials expense

2 replies

Rustler
RustlerAnswer
March 4, 2023

When you file income tax COGS is related to the cost of items held in inventory that you sell

 

Use materials expense

    Rainflurry
    Rainflurry
    March 4, 2023

    @LKTPL 

     

    If this is equipment you are renting to your customer, it is considered rental inventory and should be recorded as fixed assets, not supplies expense.  You have options for depreciating this equipment so it's best to check with your CPA/tax accountant on which option is best for you. 

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