Accounting Rules on Vendor Chargebacks May Make for Heftier Tax Bills

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Recently issued final regulations (T.D. 9652) on the capitalization and allocation of sales-based royalties and sales-based vendor allowances may put taxpayers who use a last-in, first-out (LIFO) inventory method at a disadvantage and result in a higher tax bill, practitioners told Bloomberg BNA.
Wholesalers especially could be affected, while other businesses, particularly retailers, may be uneasy about proper inventory accounting as they await further guidance, Barry Tovig of accounting firm EY LLP, said Jan. 22.
Companies that simply incur sales-based royalties upon the sale of a product that licenses intellectual property rights should be relatively happy with the regulations and are unlikely to have a heavy compliance burden, said Tovig, a partner with EY's Business Tax Services.