Hi,
I started a business last year, an e-commerce business, and am doing my own taxes using turbo tax business. I'm on Cost of Goods sold and there are four sections: Beginning Inventory, Purchases, Cost of Labor, Other Production related Costs and Less- Ending Inventory. I didn't have any beginning inventory so I left that blank. I entered the costs of products. I left the next two sections blank and then added an Ending inventory which is less than what I spent on purchases.
My question is, why does the Total Cost of Goods Sold show zero?
( For reference: The Beginning Inventory button is highlighted with yellow and when I click on that it shows the ending inventory. There is a link that says explain this and the following shows up when I click on it:
Inventory and Inventory Costs
Inventory includes all the costs directly related to producing or acquiring the things you sell.
Examples include:
- Merchandise
- Raw materials
- Work in process
- Finished products
- Supplies for production
If you sell goods rather than services, you usually maintain stock on hand (inventory). Expenses related to your inventory, called "Cost of Goods Sold" (COGS), are NOT treated like general business expenses.
You actually have to sell or otherwise dispose of the inventory before you can deduct costs.
These indirect costs are also related to inventory:
- Manufacturing supplies and labor
- Warehouse costs
- Depreciation of equipment
- Portion of managers' salaries spent on production
- Equipment used for nonproduction or administrative work
Once beginning and ending inventory amounts have been entered, there is no tax difference between reporting these expenses in the inventory section, or, later, as general business expenses on your return. )
