Texas Comptroller of Public Accounts

Texas Comptroller of Public Accounts, Glenn Hegar

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Important Information Concerning Cost of Goods Sold (COGS) and Compensation Deduction Elections

The Comptroller has reconsidered its position with regard to the election to take the cost of goods sold (COGS) or compensation deduction when filing an amended long form franchise tax report.

Rule 3.584 Margin: Reports and Payments, provides that after the due date of the report an amended report may not be filed to change the method of computing margin to a COGS deduction or to a compensation deduction.

The Comptroller has revised this policy to allow taxpayers to amend reports to change their election, or to make an election, to use the COGS or the compensation deduction. Taxpayers that elected to use the E-Z computation report or filed the no tax due information report may also amend to the long form and make an election to use the COGS or the compensation deduction. Taxpayers may file amended reports for any periods within the statute of limitations.

This change in policy with regard to amending reports does not change the eligibility requirements that must be met in order to deduct COGS or compensation. See Rule 3.588 Margin: Cost of Goods Sold and Rule 3.589 Margin: Compensation.

Rule 3.584 Margin: Reports and Payments will be amended to reflect this policy revision, and any appropriate adjustments will be made to the FAQs and STAR documents.

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