COGS

[challengertabletop]

I am a lifelong collector of Warhammer miniatures and collectible card games. I have started to sell off my collection aquired over 25 years. Since I am selling over $600 this year I am expected to be able to give the Cost of Goods Sold in the form of starting and ending value of my "inventory." How on Earth can I get the value of thousands of cards from half a dozen collectible card games and around 1500 miniature figurines purchased over 25 years, including the hundreds of pots of paint, cans of spray primer and paint brushes I've used over the years, card sleeves, card boxes, binders, etc. Which constitute the Cost of Goods in my "inventory." IRS  seems to expect me to have receipts for everything I own because some day they would change the rules and suddenly want them?

[klhmdg]

I use the cost of goods sold for items that I bought years ago as the price they sold for.

I figure that the item I have owed and used, sold for $10, then that is the cost of it.

I dont know if this is right or wrong but that is what someone paid now to own it.

[lux.ra_14]

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@challengertabletop wrote:

IRS  seems to expect me to have receipts for everything I own because some day they would change the rules and suddenly want them?

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I'm not sure of this, but I think good-faith estimates of what you paid for your collection will be sufficient. Apply your knowledge as an experienced collector. 

The IRS must realize that no one keeps receipts for every purchase. Let's hope they also realize that not all collectibles increase in value over time. Tastes change and many items decline in value, especially older purchases made before the Internet made stuff much more common.

[stainlessenginecovers]

The cost of all those goods is $0. Was a hobby, not purchased for 'business' resale to make a profit so you cannot now claim the 'cost' 25 years later. Paint buckets, cans, paint brushes etc. are perfect examples of a 'hobby' now being sold. 

You will be able to 'write' off the Fees charged, Shipping labels, packing materials, mileage if you have to drive to post office etc.

[mam98031]

With or without qualifying for a 1099K, the IRS rules are we are suppose to report ALL our income.  So even if you don't get a 1099K, you need to report your income to the IRS.

COGS = Cost of Goods Sold

We all have COGS.  If you sell here you have costs in some way shape or form.  All those costs are COGS.  

Below are some links that likely will help you.  If they create more questions or concerns, please come back and ask.  I can see you are tryin to do this the way that is in your best interest.

https://community.ebay.com/t5/Announcements/eBay-and-TaxAct-partner-to-help-you-navigate-new-Form-10...

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

https://www.irs.gov/businesses/gig-economy-tax-center

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html

https://www.irs.gov/pub/taxpros/fs-2022-41.pdf

[mam98031]

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@stainlessenginecovers wrote:

The cost of all those goods is $0. Was a hobby, not purchased for 'business' resale to make a profit so you cannot now claim the 'cost' 25 years later. Paint buckets, cans, paint brushes etc. are perfect examples of a 'hobby' now being sold. 

You will be able to 'write' off the Fees charged, Shipping labels, packing materials, mileage if you have to drive to post office etc.

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I think you missed their first sentence.

There is no requirement that to have COGS you must purchase items for resale.

https://blog.taxact.com/reporting-ebay-income-collectible-sales/#:~:text=Typically%2C%20your%20cost%....

If you purchase a collectible and need to restore it in some way.  The costs for doing that are part of the COGS.

https://www.investopedia.com/terms/c/costbasis.asp

You can use the fair market value at the time they were acquired. This can be your best guess of the actual cost, or you can search online and try to find what the selling price would have been.

https://www.irs.gov/pub/irs-pdf/p551.pdf

@challengertabletop 

Some of these links might be useful to you.

[winterpalace25]

I agree with this completely. I once read an opinion on this board that personal items you owned and are now selling have no cost basis, certainly not the original price. If you bought it and used it, you have used up your original investment in it.

As you suggest, I assign a cost of $0 to books I bought to read and own, clothes I bought to wear, etc. I do not mix them in with goods I bought for resale. Some may think I'm a sucker to do this, but it makes sense to me. I already got my use and enjoyment out of the item, and thus, my investment.

[winterpalace25]

I forgot to add that if you have a collectible that you owned and now want to sell, the gain is reported on Schedule D, Capital Gains. You definitely have a basis in those 

[wpt05]

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@mam98031 wrote:

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@stainlessenginecovers wrote:

The cost of all those goods is $0. Was a hobby, not purchased for 'business' resale to make a profit so you cannot now claim the 'cost' 25 years later. Paint buckets, cans, paint brushes etc. are perfect examples of a 'hobby' now being sold. 

You will be able to 'write' off the Fees charged, Shipping labels, packing materials, mileage if you have to drive to post office etc.

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I think you missed their first sentence.

There is no requirement that to have COGS you must purchase items for resale.

https://blog.taxact.com/reporting-ebay-income-collectible-sales/#:~:text=Typically%2C%20your%20cost%....

If you purchase a collectible and need to restore it in some way.  The costs for doing that are part of the COGS.

https://www.investopedia.com/terms/c/costbasis.asp

You can use the fair market value at the time they were acquired. This can be your best guess of the actual cost, or you can search online and try to find what the selling price would have been.

https://www.irs.gov/pub/irs-pdf/p551.pdf

@challengertabletop 

Some of these links might be useful to you.

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I would also like to add.  IMO it is better to add a number even though it may not be the exact number than to not report them at all.  In the event of an audit, which is extremely rare, I believe this would work in your favor.  

I try to keep track of everything with a spreadsheet as I go rather than wait until the end of the year to figure out everything all at once.  

[wpt05]

@challengertabletop 

Nice looking items.  Best of luck with your sales.  

[mam98031]

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@winterpalace25 wrote:

I agree with this completely. I once read an opinion on this board that personal items you owned and are now selling have no cost basis, certainly not the original price. If you bought it and used it, you have used up your original investment in it.

As you suggest, I assign a cost of $0 to books I bought to read and own, clothes I bought to wear, etc. I do not mix them in with goods I bought for resale. Some may think I'm a sucker to do this, but it makes sense to me. I already got my use and enjoyment out of the item, and thus, my investment.

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That is incorrect.  You should read some of the other posts and the links provided.

[dbfolks166mt · Accepted solution]

     There are multiple pieces to your tax dilemma. First you are not necessarily required to report inventory there is a small business seller exemption when it comes to inventory. There is also the accounting method you have to declare on schedule C, if in fact you use the schedule C to calculate your net income from your business. The two most common are cash and accrual both have their pro's and con's. However, if you do report inventory generally you are required to declare accrual as your accounting method. 

     Determining and separating your COGS, supplies and other expenses is another challenge and there are several ways to do this as others have mentioned but a lot of those have determining factors associated with them. Nobody on this forum can give you a factual answer to your question due to all the variables without more information none of which would be something you would want to post on a public forum. 

At this point in time I would suggest you go talk to a tax professional to get some answers and start the prep work for your tax preparation. 

     I probably should not state the following for fear of retaliation but the $600 to which you refer I assume you are associating with the potential new 1099-K issuance threshold. You are located in Oregon which follows the Federal requirements with regards to the 1099-K issuance and that threshold is somewhat in limbo at the moment. While the threshold was codified in 2021 it has been delayed for the past two years and remained at $20,000. There is a possibility that it may be delayed again this year or it may be set to a different value but that may not become official until very late in the calendar year. However, it really does not matter whether you receive a 1099 or not you are still required to report all of your income. 

[stainlessenginecovers]

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@mam98031 wrote:

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I think you missed their first sentence.

There is no requirement that to have COGS you must purchase items for resale.

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We all know that COG for most anyone posting here that does not have a Degree in Accounting, along with what the entire Jest of the Opening Posters post- is they were Talking about the ORIGINAL cost of the item, not all the 'other' things that you can assign a cost to- which I DID mention. 

All the 'other' things are the 

COST TO SELL

and NOT the 

Cost of Goods.

And yes, if you bought things 25 years ago with NO intention of 'reselling them' later, but as a Hobby, then it's a Hobby and MOST costs associated with you GETTING Those items (gas to drive to get them, cost of the item when you purchased etc.) Are NOT deductible- when you get in front of an Auditor. 

Therefore, in THIS scenario- what I posted was correct. $0 assigned to the item, then you can deduct the COST TO SELL, which is NOT the Cost of Goods (fees, shipping labels). 

[bigtexasyardsale]

Sorry to say but if you find yourself in an audit and have no support for COGS it will not be pleasant.

Having said that if you want an easy way to track COGS simply enter it in the "Custom Label (SKU) field.  This field will download in the transactions report and once you get it in to excel you can sum the column.

If you already use the Custom Label field for something else it gets a little tricky but its still doable. 

[gamersbaystore]

You can just estimate the cost of goods sold if its under 1 million dollars, the IRS allows this. If its over 1 million dollars, then you need to retain detailed records that show what you paid for the items you're selling.

On the down side, ebay does vet their sellers, and they will at some point come and demand you cough up receipts for everything you have listed for sale. If you cannot provide receipts, they will close your account. If you haven't encountered this yet, just know its coming.