Discussion:Direct Sales Inventory
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Discussion Forum Index --> Basic Tax Questions --> Direct Sales Inventory
Discussion Forum Index --> Tax Questions --> Direct Sales Inventory
| 3 July 2008 | |
| Have a client who is shutting down a Mary Kay business. Has about $1,000 worth of cosmetic inventory that she is going to use for personal use. All prior year tax returns have included beginning inventory, cost of goods, and ending inventory. In other words, has not simply entered Purchases as Cost of Goods Sold on the Schedule C. Where do I do with this last $1,000? (By the way, I've read about 19 pages of discussion on related topics in the archives, but that thread doesn't handle this question directly). thanks | |
| 3 July 2008 | |
| Since she hasn't deducted it, she has no income arising from its conversion to her personal use. No deduction either, obviously. It's just as if she had bought this stuff at the store.
I expect she paid sales tax on her purchases from Mary Kay; if so, there is no sales or use tax consequence to the conversion. However, if she has her own resale number and purchased these items ex-tax, she will owe use tax on their conversion to her personal use (assuming she is in a sales/use tax state). | |
| 3 July 2008 | |
| If she still needs a Sch C for other deductions, your choices are to either include $1,000 in additional sales (as if she sold the inventory to herself at cost), or to reduce beginning inventory by $1,000, being prepared to answer the question as to why the inventory numbers differed. | |
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