Incventory for taxes???

[Tabitha]

I would go with a guestimation.

Now here is the bigger problem. If you purchased your supplies tax free because you are a buisness, the govt expects you to collect sales tax on every bar that is no longer in your possesion. That means the bars you sold, the bars you donated to charity, the bars you used yourself & the bars you gave away. The tax man made a visit to my shop to explain this to me, so I am positive about this. When you do not pay taxes on a supply, you are making a promise to the govt that you in turn will require someone esle to pay that taxyou avoided. If at the end of the year you donate 200 bars of soap to your local womens shelter & they carry a retail value of $5.00 per bar & your state retail sales tax is 8%, you owe 200 bars X $5.00ea= $1000 x 8% sales tax + you owe the govt $80.00. You will probably be able to take those bars at a write off, but you still owe the sales tax on them.

That is one thing the begining and ending inventory is for. If you started w/ 5000 bars(or enough supplies to make that many) & ended with 1000 bars but only collected tax on 100 bars, they can see it doesn't add up corrcetly.

 

[Bukawww]

What about doing your taxes on a cash basis? I have heard this is a good way to avoid having to count inventory. You save all of the receipts for purchases made and all of the invoices for sales made...it sounds too easy so I am sure its wrong. Feel free to school me if you see the flaw in my logic (please because doing the inventory thing sounds awful!)

 

[Dremma]

Inventory tax rules can differ from place to place depending on the county and/or city. Or do you mean for your federal tax return?

Concerning local inventory taxes only - here it's not just soaps in stock, I have to count everything used for business in the physical location that I work from within the tax area.

So... retail display fixtures, office equipment, current stock of raw materials in the workshop, current stock of finished products, etc.

Here we fill out a form and list all current items in the location used for business purposes that are in our possession as of January 1...and do so every January 1.

When in doubt, just ask the people that you are returning the form to what exactly needs to be included and what they want by 'beginning inventory' for a first year business.

Also, you can count how many bars you have made but realistically how many ounces of coconut oil you have open or what a bunch of 4 year old used furniture is valued at you can only really guess at. Keep in mind too (for future inventory taxes) that all of your used equipment, furniture, etc. is worth less and less each year with more use.