How do you determine profit??? (2 QUESTIONS)

[booksnstuff_8]

1. Say for example I purchase 10 office chairs for $10,000 and I resell them and make $8,000, BUT I have operating expenses of $1,000 netting $7,000 before taxes, do I still record it as a profit or loss?

2. Do seller fees and ebay commissions count as operating expenses on an income statement and liabilities on a balance sheet?

Thank you

[dhbookds]

I'm trying to figure out how you could even question it as being a loss......

$18,000 sale

$10,000 cost of goods

$1,000   expenses.......

$7000 profit......

fees are certainly expenses......

[couldabeenworse]

Especially if this is a tax question, you should consult an accountant familiar with retail sales, but the short answer is that there are incomes and there are expenses, all of which need to go on your profit & loss statement.

[retrose1]

What office chair costs $1,000 wholesale?

[thenobletuckylife]

Afternoon,

I also strongly suggest that you talk to an accountant especially considering the amounts discussed but I think we need a little more info to give you a general answer.

What you wrote could be taken 2 different ways.

I think you meant that you have in the past purchased 10 chairs and your cost was $10,000.00 but when you went to resell them you only received $8000 so immediately there is a loss of $2000.00, plua an additional expense of $1000.00 etc.

Or are you saying you made a purchase in the amount of $10,000.00 worth of chairs and you then resold them for $18,000.00?

It also depends if you have already expensed these out etc.

I am sure that if I saw your paper trail it would only take about 3 minutes to figure it out but this is why there are accountants and for good reason.

Mr C

[thatsallfolks]

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@thenobletuckylife wrote:

Afternoon,

I also strongly suggest that you talk to an accountant especially considering the amounts discussed but I think we need a little more info to give you a general answer.

What you wrote could be taken 2 different ways.

I think you meant that you have in the past purchased 10 chairs and your cost was $10,000.00 but when you went to resell them you only received $8000 so immediately there is a loss of $2000.00, plua an additional expense of $1000.00 etc.

Or are you saying you made a purchase in the amount of $10,000.00 worth of chairs and you then resold them for $18,000.00?

It also depends if you have already expensed these out etc.

I am sure that if I saw your paper trail it would only take about 3 minutes to figure it out but this is why there are accountants and for good reason.

Mr C

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Exactly. Until we know what “make $8,000” means, we can’t answer the profit question.

[nobody*s_perfect]

Your expenses that you can deduct include:

$10K original purchase price (often referred to as "COGS", cost of goods sold)

$1K "operating expenses" (what exactly does that mean?)

eBay and Paypal fees

Packing and shipping expenses

If you sold the chairs for $18K, then you deduct all the expenses discussed above and the remainder is your profit that must be reported as income on your taxes. If you sold the chairs for $8K, then you have a loss and nothing to report.

As noted in the other posts, you should talk to a real tax expert, not random strangers on the internet (even though most of them are experienced eBay sellers).  In order to make better use of the tax expert's time, you should prepare yourself by looking through IRS Schedule C and its instructions, to help you understand how the IRS sees these things.  

Here's the IRS basic Help page for "online auction sellers":

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Tax-Tips-for-Online-Auction-Sellers

[dhbookds]

If you sold the chairs for $8K, then you have a loss and nothing to report.

As said.....you do need a tax consultant........  If it is a loss.....it can be used to offset other profitable sales.........

[babe4days123]

Yes, so far your showing a $3,000 loss. Not including fees and eBay commissions that I would include on an income and liabilities balance sheet.

[booksnstuff_8]

This is what I meant. I sold the chairs for $8,000 NOT $18,000.

[dhbookds]

then it's a loss.........apologies.......I misread........

[hatchchil-75]

My profit is determined when I buy. If I can't make at least 5x what I spent after fees, I don't buy

[luckythewinner]

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@booksnstuff_8 wrote:
This is what I meant. I sold the chairs for $8,000 NOT $18,000.

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Are you are a business that bought those chairs and used them for the business, and are disposing of them now that you no longer needed them?

If so, then you are disposing of an asset - not selling merchandise. And how you account for it depends upon whether they were originally treated as an expense or as a capital asset. 

If this is the case and your business has already deducted those chairs as an expense in the past, then you cannot count the purchase price as "cost of goods sold" and deduct it as an expense for a second time.

If they were a capital asset and you have been taking a depreciation expense on them every year, that will lower the amount that you can claim as as an expense when you dispose of them.