When reporting inventory do you also include the total cost of inventory in the "cost of purchase" along with drop shipped items? or just the inventory box itself?

[DS30 · Accepted solution]

The cost of your inventory will be all costs associated with the purchase of your inventory including shipping and any sales taxes you paid on the purchase of the inventory items.

If you bought an item for resale and it went directly from the wholesales company to the customer, you would still include that item as part of your cost of inventory (even if you never had any physical possession of the item).

[jason95491]

So the "cost of purchases" would only be for shipping and taxes while the "beginning inventory and ending inventory" is combined with items we had on hand and drop shipped items as well? We do not put that cost in the "cost of purchase" Only taxes / shipping / fees go into the cost of purchase?

[jason95491]

It also says if you have less than $1M in sales you're not required to report inventory. We though incurred cost for inventory / drop shipped items. How do we report that then? We reported inventory last year without 1M in sales, so should we continue the way we did last year too? (this is our 2nd year in business)

[DS30]

The cost of the inventory includes what you paid plus any expenses related to obtaining the inventory like sales taxes and shipping costs.

Yes you can report your inventory you just don't have to if less than $1M in sales.