Contact UsDid the IRS recently issue new administrative authority in connection to the tax treatment of Sales-Based Royalties and Sales-Based Vendor Chargebacks?
Federal Tax Compliance
Administrative Authority
Sales-Based Royalties
Sales-Based Vendor Chargebacks
Tax Professional Answers
Yes, The Department of Treasury recently issued on January 13, 2014 final treasury regulations that address the capitalization and allocation of royalties that are incurred upon the sale of property produced or property acquired for resale (e.g., Sales-Based Royalties), as well as final treasury regulations relating to adjusting inventory costs for certain allowances, discounts, or price rebates earned on the sale of merchandise (e.g., Sales-Based Vendor Chargebacks).
As a reminder, it should be duly noted that the Treasury Regulations provide the official interpretations of the Internal Revenue Code by the Treasury Department and have the force and effect of law.
The most common forms of Treasury Regulations include:
Proposed Treasury Regulations (e.g., binding only on the IRS and not the taxpayers);
Temporary and Final Treasury Regulations (e.g., binding on both the IRS and the taxpayers); and
Preambles (e.g., treated tantamount to legislative histories to demonstrate the congressional intent and may underlie either type of the aforementioned treasury regulations regardless of the status as Proposed, Temporary, or Final).