Schedule Cogs (Form 41a720cogs) - Limited Liability Entity Tax Cost Of Goods Sold (Page 2 of 2) in pdf

Page 2

41A720COGS (10-13)

INSTRUCTIONS — SCHEDULE COGS

Commonwealth of Kentucky

DEPARTMENT OF REVENUE

If the company is computing its LLET based on gross profits,

“Direct labor” means labor that is incorporated into

the tangible product sold or is an integral part of the

Schedule COGS, Limited Liability Entity Tax Cost of Goods

Sold, must be attached to the applicable tax return.

manufacturing process.

KRS 141.0401(1)(d)3 provides that for any activity other than

“Additional section 263A costs” means only direct material

manufacturing, producing, reselling, retailing or wholesaling,

costs as provided by section 263A of the Internal Revenue

no costs shall be included in costs of goods sold. Therefore,

Code.

taxpayers that provide services or sell intangibles are not

allowed to compute cost of goods sold for purposes of

“Other costs” means only direct materials that are incorporated

computing the limited liability entity tax (LLET).

into the tangible product sold or manufactured.

For taxpayers who are engaged in manufacturing, producing,

Line 9—Enter on Lines (a) through (k) the detail of purchases

reselling, retailing or wholesaling, KRS 141.0401(1)(d)2

included on Line 2 of each column. The total of the amounts

provides that amounts allowable as cost of goods sold must

on Lines (a) through (k) of each column should equal the

be directly incurred in acquiring or producing a tangible

amount included on Line 2 of each column. If Lines (a)

product generating the Kentucky gross receipts. Tangible

through (k) are not sufficient to include the detail of all

product means both real and tangible personal property.

purchases, attach a three column schedule listing the detail

of the additional purchases.

Purpose of Schedule—This schedule is used by a corporation

Line 10—Enter on Lines (a) through (k) the detail of additional

or a limited liability pass-through entity to compute its

Kentucky cost of goods sold and its total cost of goods sold

section 263A costs included on Line 4 of each column. The

from all sources for purposes of computing the LLET on

total of the amounts on Lines (a) through (k) of each column

gross profits.

should equal the amount included on Line 4 of each column.

If Lines (a) through (k) are not sufficient to include the detail

Lines 1 through 8—In the Federal Form 1125-A Cost of Goods

of all additional section 263A costs, attach a three column

Sold column, enter the amounts from federal Form 1125-A

schedule listing the detail of the additional section 263A

on Lines 1 through 8.

costs.

Line 11—Enter on Lines (a) through (k) the detail of other

In Columns A and B, enter on Lines 1 through 8 the cost

of goods sold amounts as provided by KRS 141.0401(1)

costs included on Line 5 of each column. The total of the

attributable to Kentucky gross receipts and to gross receipts

amounts on Lines (a) through (k) of each column should equal

from all sources, respectively.

the amount included on Line 5 of each column. If Lines (a)

through (k) are not sufficient to include the detail of all other

“Purchases” means only direct materials that are incorporated

costs, attach a three column schedule listing the detail of the

into the tangible product sold or manufactured.

additional other costs.

Schedule Cogs (Form 41a720cogs) - Limited Liability Entity Tax Cost Of Goods Sold Page 2

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