If I ship items to customers do I count the shipping as cost of goods sold or as a regular expense?

Forum|Forum|7 years ago
June 6, 2019
2 replies
4 views

If I sell items online and ship them to customers, as the shipper of the items (not the receiver of the items), do I count the shipping postage cost as a regular expense or as a COGS. It seems to me that it would be a regular expense, but I want to make sure.

TurboTax Self Employed Online

Best answer by

EDITED FOR CLARIFICATION

In your situation, the shipping expenses would be considered a normal/general business expense and not cost of goods sold.

Containers and packages that are an integral part of the product are a part of your cost of goods sold.

If they are not an integral part of the final product, their costs are shipping or selling (normal business) expenses.

For more information, you can reference the Line 39 other costs instructions in Chapter 6 (How to Figure Cost of Goods Sold) of the IRS Publication 334, Tax Guides for Small Businesses, linked to below:

https://www.irs.gov/publications/p334/ch06.html

Anonymous

Answer

EDITED FOR CLARIFICATION

In your situation, the shipping expenses would be considered a normal/general business expense and not cost of goods sold.

Containers and packages that are an integral part of the product are a part of your cost of goods sold.

If they are not an integral part of the final product, their costs are shipping or selling (normal business) expenses.

https://www.irs.gov/publications/p334/ch06.html

hottie_balottieAuthor

Level 2

I keep reading that shipping supplies (boxes, bubble wrap, etc) and shipping postage costs (USPS, UPS, etc) do not count toward COGS because these were not used in direct manufacturing of the item being sold. I guess the shipping costs don't matter too much because I don't spend it unless someone buys something, but as far as shipping supplies go, it seems like those would go under general business expenses.

Can you clarify?

ZoltanB45

Level 9

You would not need to amend the prior returns if you had entered it as COGS. An expense is an expenses and will not affect the bottom line. Now if we were talking about 2 different types of income, then I would suggest amending. Some states tax you differently on total revenue. That is not the case here.

Btx1980

Level 2

I have a question related to original post: If in the past you had unknowingly included shipping fees into cost of goods sold on Schedule C of previous years' taxes, is this something that needs to be corrected in an amended return, or just something to do differently going forward? The actual numbers leave me with the same taxable income, just was wondering how to correct this (if needed) for past years.