Hi Rainflurry,

I was hoping that your comment re: freight charges is applicable to my situation (manufacturing - we are a beverage company).

“From a tax perspective. shipping charges from a vendor for inventory do not need to be capitalized if you're considered a small business taxpayer (less than $25M in annual revenue).  Therefore, they can be expensed to COGS immediately.  Freight charges for equipment that the business uses should be capitalized into the cost of the asset“.

As shipping/freight from our ingredient vendors to our co-packer is a direct cost of inventory, wouldn’t those costs still have to be capitalized under GAAP?  I know there were changes under the TCJA in terms of indirect costs not needing to be capitalized for small businesses, but to the best of my understanding, freight on materials from vendors (i.e. freight-in) is still a direct cost.  Are you by chance able to point me to somewhere in the tax code that states otherwise?

Really appreciate any further info you can offer.  

Thanks!