Hi all, I'm doing inventory to prep for tax season, but I had questions about Cost of Goods (COGS).
Do I factor shipping costs into COGS? I have an invoice for $1.4k and around $300 of it is for shipping. Should I divide the shipping cost equally amongst every line of the invoice? Or write this off separately as "Shipping/Postage"? My gut is telling me to evenly spread the shipping across all the items, since the shipping is literally a direct cost associated with the product.
What about sales tax? If I paid taxes or customs/duties for items, should I also evenly split those costs across all the products on the invoice?
How do I round? If I split shipping and taxes/customs/duties amongst all the items on a given invoice, what if I end up with a weird number like $0.[removed]? Do I round up to the nearest cent? Or always round down?
Appreciate any insight on this. Thank you!
Here is an example of how I rationalize COGS calculation for shipping:
Say I buy phone charging cables. 10 black, 10 white, 10 red, 10 blue. They're sold in packs of 10 for $5. So my sub-total is $20. Shipping is $8.
Example Invoice/Receipt:
10pcs USB C Charging Cable, Red.....................$5
10pcs USB C Charging Cable, Blue.....................$5
10pcs USB C Charging Cable, Black.....................$5
10pcs USB C Charging Cable, White.....................$5
Shipping...................................................................$8
Since I am buying 4 types of products (4 lines on the invoice), do I take that $8 and divide it evenly into the black cables, the white cables, the red cables, and the blue cables? That would mean to add $2 per 10 pack.
So really it's like this:
10pcs USB C Charging Cable, Red.....................$7 <-$2 for shipping
10pcs USB C Charging Cable, Blue.....................$7 <-$2 for shipping
10pcs USB C Charging Cable, Black.....................$7 <-$2 for shipping
10pcs USB C Charging Cable, White.....................$7 <-$2 for shipping
To me this seems like the logical way of calculating the COGs, but then comes the issue of including sales tax/duties and the rounding.
What if the shipping was some weird number like $9.80? 4/9.80 = [phone number removed] per line. So would I round up to $0.41? Or just round it to $0.40?
