Accounting for COGS

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1

Stessa does not have a way to assign expenses as COGS, which for me as a short term rental operator, is Cost of Services. These are expenses directly tied to providing the service, not just operational expenses to run the business. These expenses are deducted differently than operational expenses and it makes a huge difference on taxable income. I have to manually manipulate the downloaded excel reports in order to get accurate reports to my CPA. It’s time consuming and anytime you do things manually then it increases the risk for making errors. I’ll probably be looking for other solutions since this is an essential need for someone doing short term rentals and not just long-term leases.

2

We don’t see operating expenses referred to as “COGS” very often in services businesses – can you provide some specific examples of the types of expenses to which you’re referring? And are you looking for a way to group these expenses on your reporting or are you looking for specific new categories to be made available?

3

COGS (Cost of Goods Sold) and Operational Expenses (OPEX) serve different financial purposes in a business:

  • COGS refers to the direct costs associated with providing a product or service. It typically includes raw materials, labor directly involved in production, and any costs incurred to make a product ready for sale.

  • Operational Expenses (OPEX) cover the ongoing costs of running a business that aren’t directly tied to producing goods or services. These include rent, marketing, utilities, software subscriptions, and general administrative expenses.

COGS in a Short-Term Rental Business

In the context of a short-term rental business (e.g., Airbnb, Vrbo), COGS applies differently compared to a traditional business that sells physical goods. Since short-term rentals provide a service, COGS includes the expenses directly associated with preparing and maintaining the rental for guests.

COGS for a Short-Term Rental Business Might Include:

  1. Cleaning Costs – The cost of cleaning after each guest stay, including laundry and any hired cleaning services.
  2. Consumables & Supplies – Items provided for guest use, such as toiletries, paper towels, toilet paper, coffee, and linens.
  3. Guest Amenities – Costs for providing bottled water, snacks, or welcome gifts.
  4. Repairs & Minor Maintenance – Small fixes between guest stays, such as replacing a broken lightbulb or fixing a clogged drain, fixing damaged caused by a guest’s stay.

What Is NOT COGS (Instead, It’s an Operational Expense)?

  • Mortgage, Rent, or Property Taxes – These are fixed expenses not directly tied to each guest stay.
  • Marketing & Listing Fees – Airbnb/Vrbo fees and advertising costs are part of OPEX.
  • Insurance & Licensing Fees – Required for business operations but not part of delivering the core service.
  • Large Maintenance & Capital Improvements – New appliances, renovations, or major repairs fall under capital expenses (CapEx), not COGS.

Why COGS Matters in Short-Term Rentals

  • Profitability Analysis – Helps you determine how much each booking costs to fulfill.
  • Tax Deductions – Many COGS expenses are deductible, which lowers taxable income.
  • Pricing Strategy – Knowing your COGS helps in setting competitive pricing while maintaining margins.