Full Version: Services or Products
From: Brian (BGALUSHA) [#1]
13 Apr 2007
To: ALL
Am in the final push on income taxes and I'm wondering if most of the slall time engravers consider themselves to be selling a Product (and thereby maintaining an inventory) or providing a service (and therefopre not maintaining an inventory).
My effort is very much poart-time and I make more badges than anything else but occasionally do a plaque, glass, or trophy. While I order in case-lot quantities if it appears likely that I'll do something similar again, I don't maintain anything like a robust inventory (except in plastic colors).
What do the other part-times out there do. Operate a service or resell products?
From: LaZerDude (C_BURKE) [#2]
13 Apr 2007
To: Brian (BGALUSHA) [#1] 13 Apr 2007
Brian,
I do not want to be the bearer of bad news, but you do sell products, so you do have an inventory.
However, since you ALSO provide a service you actually do both. Sadly, you cannot claim your inventory purchases as a cost of goods sold until you actually sell them....
If you need to get around this, I would find a supplier that would be able to ship you your blanks in one day, two at the most, and THEN you could just claim the materials as cost of good sold. Only ordering enough to do the job, with an allotment for a mistake or two along the way.
Just my two cents....want change?
From: Brian (BGALUSHA) [#3]
13 Apr 2007
To: LaZerDude (C_BURKE) [#2] 14 Apr 2007
Thanks for the feedback. I'd already decided that was the way to go and was just looking to see if others had a different approach. As usual, it just means that we have to spend much of our time working for free to keep records for the Government rather than making money for our labor that our families can use. Guess it's no great surprise that most small business fail or make no profit. I could rant further but this is not the proper forum for that.
Thanks again for your feedback.
From: UncleSteve [#4]
13 Apr 2007
To: Brian (BGALUSHA) [#3] 14 Apr 2007
If you report on a cash basis, you don't have "inventory" per se.... You deduct what you PAID for and do not deduct any payables.
When you sell the items, you cannot reduce the income by your cost of inventory since you already took the deduction and "double dipping" is not allowed.
As a part-time, home based business, are you registered as a business with your local authorities? Do you have a business account, resale number, etc.?
At the hobby level there are choices but you must make a profit within a certain number of years or you will not be able to deduct your costs..