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Level 3
posted Apr 29, 2022 3:17:39 PM

How to categorize drop-shipping

Hi there,

 

I have a Schedule C sole proprietor business with a web shop. 

 

Let's say I sell a $500 music instrument & receive payment - then another business fulfills the order and I pay them $400. It's drop-shipped - They have inventory, but I never touch the goods.

 

Is it correct for me to:

- Report $500 income

- Deduct $400 expense

 

What category should this expense go in? "Drop-shipped musical instruments"... Something generic like "Other" or "Supplies"?

 

Thanks,

-Daniel

0 3 1556
1 Best answer
Level 15
Apr 29, 2022 3:51:58 PM

Report $500 in income and $400 expense for supplies. 

3 Replies
Level 15
Apr 29, 2022 3:51:58 PM

Report $500 in income and $400 expense for supplies. 

Level 15
Apr 29, 2022 3:59:37 PM

YOu can if you want, report your costs for material goods in the Cost of Goods Sold/Inventory section. I do that, because it just makes the book keeping easier on me. But if you want, you can just report it as a supplies expense, since it's not like you have any left over "inventory" to deal with at the end of the year.

 

Level 15
Apr 29, 2022 5:52:24 PM

or use the misc category and title it shipping or postage and shipping.