Costs & Deductions
The IRS recently granted Chief Counsel information (CCA) 201302018, which supplies that, for reasons of this uniform capitalization (UNICAP) costing principles under Sec. 263A, a sale is known as “ on-site ” only when the retail buyer is physically current at product sales facility sooner or later during the product sales transaction. The level of on-site sales at a facility determines if the facility is addressed as a retail purchase or dual-function storage facility. The UNICAP guidelines don’t require taxpayers to capitalize control and storage costs sustained at retail product sales services or at dual-function storage services to the extent they truly are owing to property sold in on-site sales.
Although a CCA memorandum can not be utilized or reported as precedent, the IRS’s conclusions inside CCA could be helpful to merchants in analyzing whether specific product sales transactions qualify as on-site sales.
Background
Sec. 263A needs taxpayers to capitalize into inventory specific direct and indirect expenses to the extent that such prices are allocable to resale tasks. Common indirect prices sustained by stores include buying, handling, storage space, and related administrative costs. The regulations generally speaking permit retailers to deduct the amount of handling and storage prices being due to a “retail sales facility” but require them to capitalize the expenses attributable to non-retail sales facilities. These principles tend to be described in more detail below.
