Cost of Goods Credit Cards
80 to 90% of all my customers pay with a credit card as we operate an online store.
Should the per sale credit card charge (discount rate) be classified as a cost of goods sold?
Currently I have lumped it in as bank charges but it is a very significant part of the cost of goods sold rather than just operating expense.
This is a great question! So are the service charges direct expenses or indirect expenses?
Although the cost may be significant, it is not really a cost associated with the manufacturing or acquiring of the good or service itself, but rather an indirect selling expense ... in my opinion.
The way I look at it, when people pay by credit card, it reduces my accounts receivable administration expenses and collection expenses.
If you wanted to isolate the cost, you might consider setting up an account called "selling expenses", for example, so you can highlight the cost.
However, a case could be made to categorize this expense as part of COGS because it is a direct cost that you can associate with the cost of the product or service.
So it's probably a grey area ... and would be your call ... after speaking with your accountant.P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.