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Level 1

Payroll Taxes on COGS

All of our payroll taxes show up as an operating expense. However, 4/5 of these taxes are related to COGS Wages. Can I split this account and have the admin employees' payroll taxes stay as an operating expense and have all of the shop employees' payroll taxes go to the COGS?


If I can't split it, how can I move the Payroll Taxes expense account to the COGS. When I go to chart of accounts and edit Payroll Taxes, the "Account Type" is grayed out and set as "Expenses". It won't let me change it to COGS.


Thank you in advance to whoever can help.

3 Comments 3
QuickBooks Team

Payroll Taxes on COGS

Hello there, @jaredjbaker.


In QuickBooks, the use of weighted average cost determines the value of your inventory and the amount debited to COGS when you sell inventory. 


In the meantime, the average cost is the sum of all the cost of all the items divided by the number of items.


To know more about handling this, please refer to this related article: Understand Inventory Assets and COGS tracking.


I've added our page about employees and payroll taxes in case you need some help articles for your future tasks.


Feel free to contact me if you have follow-up questions about QuickBooks. I'll be available to provide further assistance. Have a good one!

Level 1

Payroll Taxes on COGS

Thank you for your response Grace.

I'm confused though. your reply deals with inventory's role with COGS. My question though has to do with the direct labor costs, which is part of the Cost of Goods Sold. The payroll taxes for this direct labor is stuck in operating expenses and I'd like to move it or some of it up the p&l as a COGS. See picture.screenshot.png

QuickBooks Team

Payroll Taxes on COGS

Let me help you change the expense account of your payroll taxes in QuickBooks, jaredjbaker.


Instead of going to the Chart of Accounts, you can edit your tax setup in the Payroll Item List. Here's how:


  1. Go to the List menu and select Payroll Item List.
  2. Double-click on the tax item to edit it.
  3. Click Next twice until you reached the Expense account window.
  4. Click the drop-down list for Enter the account for tracking this expense field, then select the expense account that you want.
  5. Click Next, then click Finish

Follow the same steps for the rest of the taxes. You can also take a look at this article for more details: Change an expense or liability account associated with a payroll item.


You can also add another reply below if you need anything else. 

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