Hi guys,Finally got registered as a business, and have started to record all my incomings and ougoings.
Everything has been quite sraightforward so far, but I am sending a bunch of cards to PSA for grading, and am unsure how to categorize this expenditure for accounting purposes.
When I buy collections, I categorize them as cost of goods for resale, which is fine, because I am paying tax and import duty on them. The problem with PSA’s grading service is that it is the expense resulting of ‘processing’ the raw cards, so I don’t have to pay import duty since the cards were already mine.
I am afraid of marking them as cost of goods for resale as well and the tax office thinking I am doing tax evasion due to not paying import duty on PSA’s returns.
Does any of you know who is registered as a business know if there is an accounting category for this type of expense?
Thanks in advance.
I add the cost into what I paid for the cards so grading fees essentially all goes line 36. (US taxes though it sounds like you are international so take the rest of this for what it is worth… very little)
If I buy a $2,000 collection and then spend $1,000 grading all the cards from that collection my cost basis on that collection is now $3,000. If I sell every single one for $5,000 total I made $2,000 taxable income less whatever other expenses I had in selling, advertising, listing those cards and facilitating their sale.
It gets a lot more complex as frequently you buy collections and sell part ungraded, mix part of it with other collection buys, grade and sell some, grade and keep some (withdrawn for personal use line on taxes).
All this is NY and US only for my specific situation and how it came recommended to me by a tax professional. I would suggest you consult a tax pro local to you for more specific and applicable advice to you. The absolute hardest part of all of it is estimating inventory value for year end (line 41). It is fully impossible to accurately track it item by item once you start buying large collections, but with some effort it can be estimated reasonably well.
Really appreciate your answer. Yeah, it didn’t occur to me that this is not a problem for US sellers as long as they’re buying from the US and selling in the US. So you probably don’t need to differentiate between goods bought for resale and the grading of those same goods as it is all happening in the same country.
I mean, I am considering keeping it simple and declaring it all as goods for resale as it is still a business expenditure, just not to sure if the tax office will like to see PSA invoices for orders coming from the US that didn’t get custom tariffs raised. Pretty sure they would enquire before applying any kind of sanctions.
Again, thanks for your advice.