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ijasduf888sa
Level 1

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!

Solved
Best answer June 27, 2020

Best Answers
JonpriL
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.

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3 Comments 3
JonpriL
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.

userakerslbrianlbria
Level 1

Dropshipping Category?

Yes, I'd like to know as a drop shipper do we use the noninventory and "cost of goods sold" as the entry of supposing inventory. Is that correct???? Thanks

Charies_M
Moderator

Dropshipping Category?

Hello there, userakerslbrianlbria.

 

For the list of categories that best fit the entry of your supposing inventory, please refer to this article about Schedule C and expense categories in QBSE.

 

Also, I suggest reaching out to your accountant to seek professional advice to make sure the categories you used are accurate. Or, you can post your questions here. There are available experts who can share their best practices with you.

 

If you need additional references for future tasks, you can check out these helpful links: 

The Community is always open if you have other questions. I'll be around to help. Wishing you a great day ahead!

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