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Dropshipping Category?

I am dropshipping items (i.e. reselling) and do not keep inventory. It seems like most people say I should still be treating this as "cost of goods sold", but I'd rather categorize this as "materials and supplies" since this is more intuitive and accurate. It seems like most people warn against this, but I cannot find any reason why. It even states in IRS Publication 334 (2019) that this is acceptable for certain small businesses.

 

Can anyone shed any light on what I'm missing here and why I wouldn't simply use "materials and supplies" instead of complicating my accounting by introducing an inventory method that doesn't seem appropriate? Thank you!

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Best answer June 27, 2020

Best Answers
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Moderator

Dropshipping Category?

Hello @ijasduf888sa,

 

You can use Materials and Supplies since it is the category listed in your Schedule C and it is used for tracking your items. But I'd still recommend contacting your accountant for additional assistance and guidance.

 

Lastly, here's an article you can read for ideas to help manage your account: QuickBooks Self-Employed Overview.

 

Keep me posted in the comments if you have any other questions. I'll be here to help.

View solution in original post

1 Comment
Highlighted
Moderator

Dropshipping Category?

Hello @ijasduf888sa,

 

You can use Materials and Supplies since it is the category listed in your Schedule C and it is used for tracking your items. But I'd still recommend contacting your accountant for additional assistance and guidance.

 

Lastly, here's an article you can read for ideas to help manage your account: QuickBooks Self-Employed Overview.

 

Keep me posted in the comments if you have any other questions. I'll be here to help.

View solution in original post

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