As you purchase goods, whether they\u2019re materials or finished items, you\u2019re paying for various things \u2013 the base price of the item, possible enhancements made, taxes on import, purchase etc., transportation and handling, and not to forget, possible rebates or reduction in prices as well.\u00a0<\/p>\n
A distinction needs to be made when we talk about taxes paid on purchase \u2013 whether they\u2019re refundable or non-refundable.<\/p>\n
If they\u2019re refundable and you\u2019re keeping record of all required information for the refund to actually happen (that is your authorities would get all the data they need and there will not be any problems with the refund) you will not include the tax in the cost price of the inventory. It\u2019s refundable and therefore not an expense for you.<\/p>\n
However, if we\u2019re talking about non-refundable taxes, it\u2019s another matter. Those are such taxes you will not be able to ask back from the collecting party under any circumstances and as such, they\u2019re your expense. Now of course, should the amount be very small and happen just this once, you\u2019re free to expense it right away on the income statement, however, the correct method for treating such expense is to include it in the cost price of the inventory item.<\/p>\n
This treatment should be applied to all non-refundable duties and taxes paid on the purchase.<\/p>\n","protected":false},"excerpt":{"rendered":"
As you purchase goods, whether they\u2019re materials or finished items, you\u2019re paying for various things \u2013 the base price of the item, possible enhancements made, taxes on import, purchase etc., transportation and handling, and not to forget, possible rebates or reduction in prices as well.\u00a0<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-4963","post","type-post","status-publish","format-standard","hentry","category-1-3-inventory"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4963","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=4963"}],"version-history":[{"count":1,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4963\/revisions"}],"predecessor-version":[{"id":4964,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4963\/revisions\/4964"}],"wp:attachment":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=4963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=4963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=4963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}