SG&A means selling, general and administrative expenses: the operating costs of selling a company’s products or services and running the support functions behind the business. It commonly includes sales and marketing, office and facility costs, information technology, legal, finance, and management. The precise boundary varies by company, so use the company’s own accounting policy when reading its income statement or comparing it with another business.
What does SG&A mean?
SG&A is short for selling, general and administrative expense. It groups costs associated with selling and with the general support and administration of a business. Companies typically report SG&A as an operating expense, but the label does not imply that every company puts the same costs into it.
“Selling” generally refers to activities that market and sell products or services. “General and administrative” covers support functions that help the organization operate, including finance, legal, human resources, information technology, facilities, and management. SEC filings from Amgen and IBM illustrate how the category is described in practice.
What costs can SG&A include?
Common examples include:
- Sales and marketing salaries, benefits, commissions, advertising, and travel.
- Administrative and management compensation.
- Office rent, facilities, and related overhead.
- Information technology, legal, accounting, finance, insurance, and other support costs.
These are examples, not a universal chart of accounts. Amgen says its SG&A primarily includes staff costs for sales and marketing, finance, legal, and administrative personnel; facilities and overhead; outside marketing, advertising, and legal expenses; and other general and administrative costs. Its category also includes certain collaborative marketing costs and recoveries.
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IBM lists selling costs such as compensation, advertising, and travel. Its general and administrative examples include compensation, IT, legal costs, office rental, non-income taxes, and insurance. IBM also reports items such as certain intangible-asset amortization, workforce-rebalancing charges, acquisition costs, environmental remediation, and credit-loss allowances among other operating items; those items should not be assumed to belong to SG&A at every company.
Is rent part of SG&A?
Office rent can be part of SG&A. IBM specifically lists office rental among its general and administrative expenses. However, a facility’s purpose matters: costs associated with manufacturing or another operating activity may be classified elsewhere under a company’s accounting policy. Check the company’s filing rather than assuming all rent is treated alike.
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How is SG&A different from COGS or cost of sales?
Cost of goods sold (COGS), also called cost of sales, generally covers costs closely associated with producing or acquiring the goods or services sold. SG&A generally covers selling activity and business-wide support functions. The practical distinction is the cost’s role in the business, but the exact boundary depends on the company’s disclosures and policies.
Classification can differ even for costs that sound similar. IBM discusses manufacturing and distribution costs in its cost-of-sales policy. In its 2025 annual report, Carvana says SG&A includes customer service and corporate overhead, while vehicle inspection and reconditioning and transportation from the acquisition point to an inspection or reconditioning center or another site are included in cost of sales.
Do not assume shipping, logistics, distribution, or customer service always falls into the same category across businesses. When comparing companies, first check how each classifies those costs; then compare like with like.
When is SG&A recognized as an expense?
Recognition timing can depend on the type of cost and the company’s accounting policy. IBM’s 2024 Form 10-K states: “Selling, general and administrative (SG&A) expense is charged to income as incurred, except for certain sales commissions, which are capitalized and amortized.” This is IBM’s stated policy, not a rule that every company applies to every commission arrangement.
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How should you interpret changes in SG&A?
A rising or falling SG&A total does not explain itself. Compare equivalent periods, examine the functions and segments disclosed, identify major cost drivers, and account for allocation policies and unusual charges. Where available, review both the dollar amount and a relevant ratio over comparable periods; there is no single SG&A ratio that can be treated as appropriate for every industry.
Revenue alone may not explain the movement. MAXIMUS describes SG&A as indirect costs for general management, marketing, and administration, primarily labor. It distinguishes segment-level costs from corporate costs, which it says are allocated to segments on a consistent and rational basis. Its filing also says fluctuations are primarily driven by changes in the administrative cost base, which is not directly driven by revenue, and discusses growth, workforce, and infrastructure investment as context. These are MAXIMUS-specific disclosures, but they show why it is useful to inspect a company’s explanation of its cost base.
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Amgen’s advertising expense offers a concrete example of year-to-year variation: the company reported $987 million for 2024, $647 million for 2023, and $841 million for 2022 in its 2024 Form 10-K, filed in 2025. Amgen says advertising costs are expensed as incurred. These are company-specific figures, not an industry benchmark.
How can a company manage or reduce SG&A?
There is no universal reduction target or cut list established by the company disclosures cited here. A company can make its analysis more useful by examining the costs and drivers it actually reports, then evaluating proposed changes against their effects on selling, service, and operational outcomes.
- Break down the category. Separate functions or segments where the company provides that detail, instead of treating SG&A as one undifferentiated number.
- Identify cost drivers. Review disclosed factors such as staffing, sales activity, office footprint, technology, and infrastructure. Determine which costs are recurring and which are unusual or transaction-related.
- Check allocations and classifications. Understand how corporate costs are assigned to segments and whether logistics, customer service, or other costs are reported in SG&A or cost of sales.
- Compare consistent periods. Use comparable time periods and definitions, and consider both dollar changes and a suitable ratio without treating any one ratio as a universal target.
- Assess trade-offs before cutting. Test whether a proposed reduction would undermine sales, customer service, compliance, or the operational capacity the business needs.
For a business owner or manager, the useful question is not simply whether SG&A is high. It is which costs are driving it, what those costs support, and whether the business is getting the intended result from them.
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