PaulaM
Employee Tax Expert

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It's going to be your inventory costs to you, not the retail value if you are using the cost method (most common) of reporting.

 

Here's the how inventory is used to calculate cost of goods (COGS) sold: Beginning inventory + purchases - ending inventory = COGS. 

 

EX: If you began your business in 2017, beginning inventory would be 0 + the costs of your frames, etc - ending inventory mounts. Some numbers:   0 + $2000-$1800=$200 COGS

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