The last several months have seen an abundance of developments
in the treatment of the COGS deduction for purposes of the Revised
Texas Franchise Tax (RTFT). These developments will have
prospective, and in some cases, retroactive effect. In an effort to
effectively report on these items, we are taking the
"shotgun" approach – short, compact summaries of
the issues within the COGS calculation that have captured the
attention of taxpayers and the Texas Comptroller.
The COGS deduction is one of three deductions from total revenue
that may be available for election by taxpayers. The COGS deduction
is allowed to taxpayers that acquire or produce "goods,"
defined as "real or tangible personal property sold in the
ordinary course of business of a taxable entity."1
The Texas Tax Code generally adopts the federal UNICAP principles
of Internal Revenue Code (IRC) Sec. 263A, but with substantial
modifications.2 The modifications have become the
general source of significant and
