Schedule COGS: Limited Liability Entity Tax Cost of Goods Sold (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
Kentucky Schedule COGS computes a corporation’s or limited liability pass-through entity’s Kentucky and total cost of goods sold for calculating the limited liability entity tax (LLET) on gross profits. It reports inventory, purchases, labor, and other allowable costs and attache
Who files this form
Schedule COGS is used by a corporation or limited liability pass-through entity to calculate Kentucky cost of goods sold and total cost of goods sold from all sources when computing the limited liability entity tax (LLET) on gross profits.
Allowable costs must be directly incurred in acquiring or producing a tangible product in manufacturing, producing, reselling, retailing, or wholesaling activities. Taxpayers that provide services or sell intangibles cannot compute cost of goods sold for LLET purposes.
What you'll need
Have these details ready to complete the schedule:
- Entity name, Kentucky Corporation/LLET account number, and federal identification number.
- Beginning and ending inventory, purchases, labor costs, additional section 263A costs, and other costs, for both Kentucky and all sources.
- Itemized details of purchases for line 9, additional section 263A costs for line 10, and other costs for line 11.
If the detail lines (a) through (k) do not provide enough space, attach a two-column schedule listing the additional items.
How to file
Attach Schedule COGS to Form 720, 720U, PTE, or 725.
Enter costs attributable to Kentucky gross receipts in Column A and costs attributable to gross receipts from all sources in Column B. Add lines 1 through 5 to get line 6, then subtract ending inventory on line 7 to get cost of goods sold on line 8.
The supplied text does not give a mailing address or e-file directions.
Common mistakes
- Including costs from ineligible activities. Costs from activities other than manufacturing, producing, reselling, retailing, or wholesaling must not be included.
- Including indirect labor. The instructions expressly prohibit indirect labor costs.
- Leaving out purchase details. If line 2 has an amount, provide the details on line 9. Missing details will result in the purchases claimed being disallowed.
- Leaving out additional section 263A cost details. If line 4 has an amount, provide the details on line 10. Missing details will result in those costs being disallowed.
- Using detail totals that do not match. In each column, the details on lines 9, 10, and 11 must match the amounts on lines 2, 4, and 5, respectively.
Questions people ask
What is the difference between Columns A and B?
Column A reports cost of goods sold attributable to Kentucky gross receipts. Column B reports cost of goods sold attributable to gross receipts from all sources.
What counts as a tangible product?
The instructions define tangible product as both real property and tangible personal property.
What can I include as purchases or other costs?
Purchases and other costs mean only direct materials incorporated into the tangible product sold or manufactured. Additional section 263A costs are limited to direct material costs under IRC §263A.
Which labor costs are allowed?
Labor must be incorporated into the tangible product sold or be an integral part of the manufacturing process. Indirect labor must not be included.