How do I itemize shipping charges from sales via Mercari selling app? What they will report is total w shipping.

[Entrepreneurdude]

Thanks I appreciate it, I think what your saying is if you offer free shipping then you can deduct C.O.G.S because it was an expense to you, since I am eating the cost of the shipping, and my receipts clearly show $-5.50 shipping (cost to me), directly taken from my profit according to the receipt of sale.  I don't see how it matters if it was built into the total cost of the item price or not, it's still an expense to me as a necessary and ordinary part of doing business, so deduct through C.O.G.S

In the case of buyer paid shipping, buyer pays for shipping, my receipts show, shipping cost $0.00 (to me) but Mercari STILL reports those shipping costs from my sales to the IRS, even if it's the (customer) paying for it, so it's still sent to the IRS as total income. So it's actually the same thing, both count towards my gross un-adjusted income. Therefore my question: Can you deduct C.O.G.S in both cases. Thanks!

[JohnB5677]

Yes, you can include the cost of shipping TO your customers, but it is not included in the Cost of Goods Sold.  COGS would account for charges for freight coming into you.

The expense of shipping to the customer is directly related to the sale of the product, so we include it in the Cost of Sales section and include it in the gross profit calculation.

[Entrepreneurdude]

Thanks! are you saying regardless if the buyer is charged for shipping or I pay the cost of shipping it's always included in the 'cost of sale,' therefore the IRS will know to separate those shipping costs from left over net income after deductions, that way I don't get taxed 25% on income I don't profit from? So in other words: free vs buyer paid shipping is really the same thing. It all goes to 'cost of sale' section, so I'm assuming it's function is to calculate my ending taxable net income, separated from what I never profited from (un-adjusted gross sales reported by Mercari?)