generally, small businesses other than C Corps, partnerships with C Corp partners and tax shelters can use the cash method of accounting if annual average gross receipts for the 3-prior years doesn't exceed $26 million. (IRC 448). if you use the cash method there is no accounting for inventory so accounting for the labels becomes moot. It's an expense. 263A doesn't apply as regards to inventory costs. per IRS PUB 538 . If you must account for an inventory in your business, you must use an accrual method of accounting for your purchases and sales. once you account for inventories you can not change your method without filing form 3115 (page 18)
it's not clear that you account for inventories but if you do then you look to the following;
of minor or secondary importance, carried on hand without keeping a record of consumption, and no beginning and ending inventories are recorded
- is this true? minor or secondary importance is something you have to decide and the IRS can always disagree
if expensed is taxable income still clearly (fairly) reflected?
- again your opinion vs the IRS
for a frame of reference, the IRS allows businesses that do not have financial statements to expense (not even required to capitalize and depreciate) equipment costing $2,500 or less.
The IRS announced in Notice 2015-82 that it has increased the de minimis capitalization (safe
harbor threshold from $500 to $2,500 for taxpayers without applicable financial statements
effective for costs incurred in tax years beginning on or after January 1, 2016
