In recent years, the Internal Revenue Service (IRS) has been aggressively attacking drilling businesses that sell what they label "merchandise" and also use the easier "cash" method of accounting. All-too-often the IRS is successful in forcing them to switch to the more difficult accrual method.
Now, in a major concession, a new IRS Revenue Procedure (Rev. Proc. 2000-22, 2000-20 IRB 1) allows every qualifying drilling contractor and equipment dealer with average gross receipts of $1,000,000 or less to use the cash method of accounting.