Inventory is a HOT TOPIC for resellers. The IRS changed its stance on tracking inventory for tax purposes, and small resellers are technically ALLOWED to use the cash method of inventory. PLEASE NOTE: I STRONGLY encourage you to manage your inventory on an ACCRUAL basis. What does this mean?

When you buy items for your reselling business, they are considered assets until they are sold. At the time they are sold, the price you paid for them, will move to your COST OF GOODS SOLD. This method gives you a few things:

• A clear view of your profit on each item you sell.
• An income statement (profit and loss) that is far more reflective of what you have actually made after expenses.
• It could potentially save you a great deal of money on your taxes, as it evens out your costs to reflect the cost of goods sold as a component of your actual sales. This could potentially keep you in a lower marginal tax bracket, and qualify you for credits or deductions. Please consult with your personal tax advisor/consultant (or book an appointment with us) to discuss your specific tax situation.