Where do I enter equipment sales for a self employed business using the home and business version of TurboTax?

[jhoose]

Most of my work is consulting although sometimes I resale equipment on a project.

[Carl]

That would depend on a few factors.

Equipment that is used on a recurring basis for the production of income is a business asset, and it's acquisition by the business is reported in the business assets section. Said equipment is depreciated over time. Most "equipment" is depreciated over 5 years. When you sell that equipment, you report it's disposition in the business assets section.

If equipment is purchased for one time use on a job, that too can be a business asset. Depending on the specifics, it could be considered inventory. But inventory is generally used by a business that is "in the business" of purchasing a product at one price, and selling it at a higher price for a profit.

[jhoose]

Carl,

Thank you for the note and details.  So to explain a little clearer, I consult on projects to build operating plants.  Sometimes the clients asks me to provide the equipment I am recommending.  So I would basically arrange the purchase through the manufacturer like a buy resale.  Depending on the equipment I will take a small markup or commission. So either I would markup the price of the equipment from the manufacturers price or I would pass the manufacturer to the buyer and the manufacturer would pay me a commission.  The commission is easy as I usually receive a 1099 but for the resale should I just put down the markup under general business income or do I need to account for the full equipment value as a sale and then document the manufacturer cost as an expense?

Thank you in advance for the direction.

[Carl]

Where you purchase the equipment and then sell it to the buyer, I would treat that as inventory.

In a case where you just arrange the purchase and the transaction is between your client and the equipment provider and you never touch the money as it passed from the buyer to the seller, you have nothing to report.

As you stated, in the case where the equipment provider gives you a commission, you already know how to handle that.

In my limited experience, this is basically what a roofer does. (My brother is a roofer). When he quotes a price for a new roof, it includes the cost of the materials. He purchases the materials and records it as inventory. Then when he completes the new roof he reports the sale of that inventory as "a part of" the quoted price for the new roof.

In a case where the client provides the materials he has nothing to report in the cost of goods sold section.

[jhoose]

Carl, thank you for taking the time to reply and the details. I will try it.

[Carl]

One other way is if you pay for the equipment and then pass the cost to the customer, you show what you paid for that equipment as an expense. But when dealing with high cost equipment I don't know if expensing that equipment in the expenses section would raise flags or not. I don't think it would. But I can't be 100% certain. Even if it did raise flags, I don't see it as a problem since you'd be able to prove things anyway.

[jhoose]

Thank you