I have a small business with ending inventory. Do I include the state, county, and local taxes that I was charged for on those purchases with the total of my inventory?

[DS30 · Accepted solution]

It depends but you include the taxes that you paid to purchase an item of inventory as part of the cost of that inventory.

So for example, if you purchase item XXX for $35 and paid $3.50 in taxes on the purchase, then your cost of item XXX would be $38.50 and this would be the amount to book as your inventory cost for item XXX.