Need an explanation of what can be deducted as "shipping costs" for a business.

[bobbyhickory]

I have seen a number of articles and posts about writing off "shipping costs" as a business expense but none of them are clear on what this means.  Here are my questions for clarification:

1. Does this refer to shipping costs that I paid in order to ship a product that my business sold to a customer?

2. In most cases, my shipping rules are set up so that the exact amount that I will pay is charged, so I'm assuming that in this case, there would be nothing to expense/write-off because it evens out in terms of cost accounting.  Is this correct?

3. In the event that the cost I pay to ship the item is higher than what the customer paid me for shipping, I'm guessing I could write off the difference, right?

4. Since the shipping costs that I paid to have products shipped to me as part of my business are already part of my expenses, I'm assuming that there isn't anything different for this type of "shipping cost" but I wanted to double check- is there anything I should be doing differently with this cost?

Thanks a ton in advance!

[Carl]

1. Yes

2.  "ALL" income received from a client/customer "for any reason/purpose" is business income. That would include shipping costs paid to you by that client/customer, even though you turn right around and pay it to the shipper.

3. Look at it this was (because the IRS does). All money received from the customer "for any reason" is business income. All shipping expenses incurred by the business is a deductible business expense. Period. Shipping paid to you by the customer does not have to match what you pay the shipper. In fact, it rarely does for most businesses - as a small percentage of the business profit is the overcharge on shipping they pass to their customers.  Typically a business will overcharge shipping to the customer anywhere from 5 to 25% so as to ensure the business does not incur a loss of profit on the product being shipped.

4. Shipping costs you pay are shipping costs. Doesn't matter if its a shipping cost you pay to have a product sent to you, or shipping cost you pay to send product to a client/customer. Generally, shipping costs for products that are sent to you are included on your books in the price you paid for that product. Whereas shipping costs you pay to send product to a client are included as a part of your COGS (Cost of Goods Sold).

The first is claimed/deductible in the tax year you pay it. The 2nd is claimed/deductible in the tax year you sell the product.

[VolvoGirl]

You can deduct all shipping costs you paid either shipping to you or that you paid to ship to your customer. 

Don't think I understand your #2.  If you charge the customer the full amount plus shipping then that is your gross income.  You can then enter the total shipping as a separate expense.  

#3 The whole shipping amount is an expense.  See #2.  

Probably would help to use examples with amounts. Say you charge the customer $220.  $200 for the item and $20 for shipping.  You enter $220 for income.  Then you enter the $20 shipping as an expense and the net profit would be the $200.  But if the shipping actually cost you $30 you enter the $30 expense.  Then your net profit would be $220-30=$190.  

[bobbyhickory]

Awesome, thank you very much 👍