Tax question

[VengeanceASX]

Ok, so this is the end of my first year operating as an in-home FFL. I have a few questions regarding taxes: how to I record personal inventory that I sold through the business, i.e. Personal firearms? Are DROS fees paid categorized as cost of goods sold? Thanks, I will be grateful for any other tax pointers as well. Yes, a CPA is doing my taxes, I am just trying to get my paperwork in order.


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[ugimports]

Your CPA should help you with some of this which is good. My accountant had me classify DROS fees as Licensing Fees (not COGS). Are you saying you sold personal firearms as "inventory"? Or you PPTd them? If you PPTd them no impact to business income/taxes. Now in theory it there may be a different area related to "misc income" on your 1040, but I don't know.

If they were sold as inventory they you should already be taxing them with the business income depending how you wrote up the receipt.

Are you using something like quickbooks?

[VengeanceASX]

I am using outright bookeeping which has all the categories and I am just trying to make sure everything is categorized properly. Yes, I had some firearms that I put in inventory when I opened shop. Do I put the market value down as an expense?


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[ugimports]

I am using outright bookeeping which has all the categories and I am just trying to make sure everything is categorized properly. Yes, I had some firearms that I put in inventory when I opened shop. Do I put the market value down as an expense?


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don't know -- accountant question.. I would list it as COGS though in quickbooks. Not sure about your setup. I've also never imported anything from personal inventory. Did you pay yourself for them from your business account? I don't know how that works when you donate them. I assume COGS for it is 0 and it's 100% profit when you sell, but I have no idea.

[Baboosh]

Not sure why you would donate items from your collection to your FFL business. You should have just sold them personally, why pay tax on that income when it was not a business asset to begin with.

You did not sell any personal firearms through the business, or I hope you didn't. What you did was a PPT for someone and that someone is YOU. If you claim the guns as a business asset you will be pay tax and since it was 'given' to the business you cannot mark the purchase price as an expense

Now if you sold the guns to your FFL business I hope you did the required FDSA paperwork.

Basically by doing what you are saying here you made it difficult and opened yourself up to other taxes.

DROS fees are listed under Licensing Fees for me. By definition it is not COGS.

If you are paying a CPA to do your taxes these are all something they should be going over with you. I hope by CPA you actually mean a CPA and not TurboTax or any other of those walk in places.

[VengeanceASX]

It seems that I should run everything I sell through my business, I am going to have to pay taxes on them anyway if I am an honest tax payer.


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[ugimports]

It seems that I should run everything I sell through my business, I am going to have to pay taxes on them anyway if I am an honest tax payer.


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For personal inventory you are paying sales tax unnecessarily. You are allowed a certain amount of personal sales non-taxed (check with your accountant on specifics). Putting everything through your business means the buyer is paying sales tax on something they shouldn't and the state gets extra money.

Also, those personal items you sell through the business get double taxed..sales tax when you bought it and then sales tax again when you sell it. State gets double money again.. plus potentially tax when its sitting in your inventory.

You're more than welcome to pay extra taxes, but if you can avoid it within the law you should in my opinion.

[mw20]

I'll throw in my 2 cents as an accountant and CPA.

DROS fees are not COGS. It fine to list them as a separate expense like licensing fees or something, but personally those expenses never even hit my P&L. I don't consider the $25 income, nor expense. I just record them as a liability on my balance sheet. (sorry if that is too technical)

As for you selling your personal guns through your business, I agree with the postings above. I would treat it as a PPT and you are the private party. That being said there are reasons you may want to add them to your inventory. And if you do, you should add them in at the fair market value at the time of the transfer. Don't forget to record in your A&D book. When sold the cost is the same as it was transferred in at. So if transferred in at fair market value and sold soon after at the same amount, there is no gain or loss, and additional sales taxes to pay.

[ugimports]

I'll throw in my 2 cents as an accountant and CPA.

DROS fees are not COGS. It fine to list them as a separate expense like licensing fees or something, but personally those expenses never even hit my P&L. I don't consider the $25 income, nor expense. I just record them as a liability on my balance sheet. (sorry if that is too technical)

This is how mine is setup (as a liability).. My accountant setup my quickbooks when I started and when I described the fees that's how she configured it.

[mw20]

This is how mine is setup (as a liability).. My accountant setup my quickbooks when I started and when I described the fees that's how she configured it.

Yep, it's better that way. You don't want to muddy up your operational expenses with non-operational expenses. You're just the middle man, like sales taxes. But remember you are on the hook if you don't collect from your customer. Gotta love how that works!

[VengeanceASX]

Hey guys, thanks for all the info! I think I have it all set up properly, now. We are meeting our accountant on Sunday and I think this will help the whole process.


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