DALLAS, Nov. 29, 2016 /PRNewswire/ -- To promote sales of their products, wholesalers and manufacturers provide retailers allowances, credits, and rebates in exchange for advertising promotions or vendor-funded incentives (VFI). Some promotions are based on sales (e.g., volume incentives), and some are for advertising (e.g., product demonstrations). In a recently published memorandum, the Texas Comptroller instructed auditors that sales-based VFIs can be used by auditors to reduce a taxpayer's cost of goods sold (COGS), provided the VFIs are not reported as revenue. Examples of VFIs that auditors were instructed to exclude from COGS calculations include coupon program face value, depletion allowance/volume incentives, markdown funding, new-item allowances, sales-based incentives, and temporary-price reductions. Because the computation of COGS in Tex. Tax Code Section 171.1012 specifically excludes "selling costs and advertising costs," an auditor cannot use contra-expense accounts for VFIs that relate to advertising or selling activities to reduce a taxpayer's COGS calculation. Examples of selling or advertising-based VFIs include advertising, coupon-program-handling fees, product demos, product placement, and shows and seminars. About Ryan Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a five-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.
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