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Returning Member

COGS / COS for Service based business

I and my business partners have an LLC. We provide a multitude of variable services to clients including but not limited to planning and facilitating events (such as art benefits), providing design services, and art commissions (such as mural design and installation). Would supplies bought to throw an event qualify as COGS (beer, wine, decorative materials, materials used to create merchandise)? Further more Would materials or supples bought to paint a mural count as COGS? It is hard to tell what counts as COGS or COS for a mainly service based business. Any help determining what falls in these categories for this type of service business would be helpful.

1 Reply
Level 15

COGS / COS for Service based business

COGS sold is for products that are re-sold to customers.

So the beer, wine does not belong here.

The materials and decorative materials can be entered as purchases and then you would do the inventory at year end to determine if this all expensed.

The paint would be a direct expense. 

COGS is not common in service business and if so, it would be small amount.  so when I said materials and decorative materials above it would really depend on how much they cost if they are used in the regular jobs you do.

Most areas of COGS are retail operations, or manufacturing.

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