Need Help! inventory question personal and free items

[belaamir-0]

I really need help with selling and logging items because of lack of records or avoiding unnecessary records to make life easier.

i plan on selling as a business and will definitely keep track of my future cost of goods and sales thoroughly  but what about the items I have already?

Lets  say you have hundreds of items ,clothes electronics ect...some are personally yours and ALOT of stuff is things you got for free. For example if it's clothes, and there's a hundreds and u got a handful at a time for free from different places and dates over time to build inventory.  So how do you handle that? I don't want to claim any cost and prefer to call it zero purchase price. But what about dates?? And can I just log it when I sell it instead of going through each one for inventory like I plan on doing for my COG's? 

[gracieallen01]

You probably would be doing yourself a huge favor by consulting a local - bookkeeper or CPA - professional who knows the rules and regs for your locale.

Setting up your books and bookkeeping structure right, in the beginning, will make life one heck of a lot easier in the long run.  And, consulting a local will give you the inside on what YOU need, rather than what works for 'others'.

[belaamir-0]

I really appreciate the response and I know that's pretty much the best answer I can get as far as overall accuracy. But its just that for right now I need to get a basic understanding of the concept to get going before I can have the chance to get the right professional accounting help. I just figure if it's free and cost zero, I should call it totally taxable and just log it when sold. But the dates and location might conflict as they will probaly all get mixed up in storage. I feel The concept should still be like selling a shirt that you don't remember when or where you bought it from 

[gracieallen01]

The one thing that I noticed, is that - in the beginning - until you have established an inventory, IRS, in particular, is interested in what you owe from the added income of your sales - taxable income.  I suppose you can not worry too much about it and add an item to your inventory when you list it.   Until it is listed as inventory, it is personal property.

And, then find out the ins and outs for your state and city and county, as applies to your area.

[mr_lincoln]

@belaamir-0 Go to irs.gov and download a schedule C form, you will see the kind of things that will be required for tax purposes.  Keep in mind that you may also be required to pay stat sales tax whether you charge it or not.  Our state gets paid on ONLY in state shipments. 

Keep in  mind you can deduct things as business expenses, which would include any inventory you purchased ... I know you said much of your was free BUT, if you drove to get it then the mileage is a deduction, currently they allow 53.5 cents per mile.

Anyway, before you pay a CPA to do any work download the form and instructions and read through it. 

[belaamir-0]

I just needed some reassurance since I'm totally new to this level of accounting. Especially when making the sale and how relevant the dates are for free/personal items. It's very easy to sell but making sure everything is structured is hard because one mistake I will have to go back over hundreds of free items and it might not even be necessary to do so until it sells anyway. It would be easy if it was just things I buy as I go but right now I have a cost of goods of like $20 but way more potential profits because of what I already sought out. I will probaly be getting a lot more free items and purchasing some that's why it was a concern from this point creating my system and trying to insure my self if any questions arise. I plan on just having a COGS log and sales log as the core. Once again thank you for the response

[belaamir-0]

Yes I am in CA so no online sales until I get a sellers permit for state taxes. I will probaly be a little hesitant claiming mileage deductions for the free stuff even though it will be for specifically for business only. Since getting the items are $0 and have blurry lines between personal and business since there's so many it's hard to filter and track the quantities at the moment. Probaly just claim the cost of selling till I get a CPA. Just want to minimize the honest mistakes in the beginning for the long run.  Thanks for the response, all advice is very valuable right now!

[femmefan1946 · Accepted solution]

you have hundreds of items ,clothes electronics ect...some are personally yours and ALOT of stuff is things you got for free.

It's all personally yours.

Unless you are selling on consignment for friends or relatives. And that's a recipe for disaster.

and ALOT of stuff is things you got for free.

If you bought it and used it and are now selling it, the procurement value is zero.

If you got it free and are now selling it, the procurement value is zero.

But what about dates??

What date did you decide to sell it? That's your procurement date.

Up until then, it was for personal use.

And can I just log it when I sell it

Again, bad idea.

Assign your inventory numbers when you list.

It's going to take you a good ten minutes to list each of your items, including photography/scanning, description, measuring for shipping costs, so add into that assigning the inventory number and procurement information as you go.

If you are a fast typist.

If you can work a solid five hours a day that's about thirty items listed daily.

Your first 50 each month are listed free, but as a new seller you will not be allowed to list many more than that each month.

When you can list more, you should consider  a Store to reduce your monthly fees.

FWIW- I have use an alpha-numeric inventory system for some of my products that has a masked date of procurement plus source plus price.

For example  "J17 win .75 17x10x2cm  259g" which would be October 2017 from WIN (a local thrift) 75cents.  I also have the dimensions and weight since I need that for setting up Calculated Shipping.

The only reason I mask, is that sometimes I forget to take the slip out of the item and ship it off. Normally I staple it to my copy of the paid invoice.

[siayan]

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@belaamir-0 wrote:

I really need help with selling and logging items because of lack of records or avoiding unnecessary records to make life easier.

i plan on selling as a business and will definitely keep track of my future cost of goods and sales thoroughly  but what about the items I have already?

Lets  say you have hundreds of items ,clothes electronics ect...some are personally yours and ALOT of stuff is things you got for free. For example if it's clothes, and there's a hundreds and u got a handful at a time for free from different places and dates over time to build inventory.  So how do you handle that? I don't want to claim any cost and prefer to call it zero purchase price. But what about dates?? And can I just log it when I sell it instead of going through each one for inventory like I plan on doing for my COG's? 

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You could use 2 different selling accounts, one to get rid of the personal and the other for business. 

This would keep it separate from each other. If your sales are above a certain amount you would get a 1099 for both but you could then separate the personal out. The IRS wants to see how much money came in and what was the income. If you get audited then it needs to be explained. 

It is best to keep everything separated and not mix. You may find the personal total is not going to affect your tax rate that much if at all and separating isn't even worth it.

An accountant at the end of the year can handle it if your ledger easy to understand.

[gracieallen01]

BOE for Ca is no real biggie - but necessary.  It is primarily for when you buy something IN CA and want to not pay sales tax, and then for when you sell to someone IN CA and charge sales tax that you have to remit to the state.  They will tell you when they want it - quarterly, semi-annually or annually (generally quarterly).  General profit or loss goes on the CA income tax form.  Sales tax, beginning/ending inventory and such goes to BOE on the quarterly (or whenever - it frequently depends on how much you sell in-state as to how often you have to file)

As far as mileage goes, get yourself a little 'Day-Timer' book for the year, keep it in the car and just record ending and beginning mileage every time you go to do something applicable to your business - thrift shops, estate sales, rummage sales, post office, and such.  DO NOT mix in the grocery store or cleaners or 'other' errands.

As femmefan1946 says, assign a number to each item - alpha-numeric is a very good way and, especially, include a year indicatior.  MyDatabasePro is a good 'simple' database or excel or whatever you want to use to set things up and is meaningful to YOU so that you understand it and can explain it to the 'tax people' if the need ever arises  (If your setup is logical and the numbers are within reason for your sales and income, you will probably never have to have a 'talk' with them, other than to ask an occasional question).

[sidemouse]

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@belaamir-0 wrote:

I really appreciate the response and I know that's pretty much the best answer I can get as far as overall accuracy. But its just that for right now I need to get a basic understanding of the concept to get going before I can have the chance to get the right professional accounting help. I just figure if it's free and cost zero, I should call it totally taxable and just log it when sold. But the dates and location might conflict as they will probaly all get mixed up in storage. I feel The concept should still be like selling a shirt that you don't remember when or where you bought it from 

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No.

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@belaamir-0 wrote:

I really appreciate the response and I know that's pretty much the best answer I can get as far as overall accuracy. But ... But the...

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No.

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@belaamir-0 wrote:

I really appreciate the response and I know that's pretty much the best answer I can get as far as overall accuracy.

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 Correct.

[pf9000]

You can do inventory with Microsoft Access. Many companies do inventory with Excel. You might want to buy one of those books on Access For Dummies, or Excel. Or possibly buy a low cost Inventory Software Package.

[belaamir-0]

Wow well said. That's exactly the information I was looking for. I was just looking for a basis for what the items mean as far as information because I'm definitely looking for these items to sell as a business but some is kept or donated thrown away and having a large number of similar items aquired In the same week mixed in is so hard to date and declare the source individually. Imagine hundreds of clothes books electronics little random items divided by 4 or 5 in one single week, entering it over and over and get the sources mixed is easy.So a procurement date as they're officially going to be listed would really help. I know this has got to help more than just me because I couldn't find much info on this. Most articles I found refer to personal items sold less than purchase price while these are items %100 taxable income. Thank you!

[sam9876]

Do not get a seller's permit.

[belaamir-0]

Ok last thing, how important is the source for free items like that could be literally on the curb, post yard sale or or ect can I just narrow it down to something like "craigslist free section" as source? Or just "personal item" for a one size fits all type of thing?