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Lets say you buy a total of $500 worth of sets and part them all out. Then you do $1,000 worth of sales.
You could simple COGS the entire $500 worth of inventory and take the $500 profit.
Or you could COGS 50% of the inventory and take $750 profit.
Accounting is not as black and white as you'd think, which is why you read about funny business accounting scandles. Think Enron...
You don't actually have to keep track of every single item in your inventory, a total dollar figure can work as well, depending on the items.
Stores like Half Price Books does this, they don't keep track of every book in the store and what every single book cost, they simply keep running totals.
At the end of the day, it all works out sooner or later and the tax man is usually happy enough with this.
so, let's say you bought that $50 set in December of this year but did not sell it until January of 2013. You can not deduct the $50 when you file 2012 taxes, you have to wait until you file 2013 taxes. In essence, the profit and the cost will always be reported in the same year.
You can do it more than one way. There is something called GAAP (generally accepted accounting principles) and for many businesses that is what they use.
But you can do it another way as well. So long as you could show the IRS that you are consistant with how you do it and that you are not cheating them in the long run, they probably will accept almost any method you choose. Ahh, my information and advice is for the USA only, I don't know enough about tax and legal issues outside the USA and those rules are probably different in many ways.
Thanks to all who gave advice and encouragement :) I've actually been able to make a few purchases this week for resale later on, and it'll be interesting to see how they go. Some have suggested Craigslist, I have been checking it daily but so far haven't seen any good deals. Gonna try the yard sale/ thrift store thing too but of course will then have to factor in the cost of gas/ time spent etc.
I saw that WV Bakery had changed back to "call for availability" earlier today but checked it again just now and it's "sold out" again. :(
mathew (sorry I don't know how to do the "@name" thing- is that just turning the name into a link?)- I too think it might be cool if they did limited re-releases, I would for sure love the chance to get Cafe Corner at a reasonable price! But some time ago they did a series of "Legends" re-releases that apparently did not go over too well, so it's doubtful they'll try it again.
Total £/$ sales - total £/$expense = profit.
Of course there will be months when you spend more than you sell and vice versa, but over the course of a year it would balance itself out. This is also the easiest way of working out VAT if you are selling enough to have to be registered (£73,000 per 12 months I think).
I try wherever possible to keep under this limit as it is a pain in the arse!
Just my opinion of course and obviously different countries have different methods they prefer but from my experience, as long as you have a clear method for working out your taxable income, the taxman will be happy as long as you file your return and pay any amount owed on time.
LEGO has zero incentive/benefit from a secondary reseller market, especially of new/recent product.
And for the record I have nothing against resellers - if I had the time and energy I'd consider it, too, but from LEGO's point-of-view, resellers are bad for business.
BTW, Amazon has it now for less than $90...
Both these small sets are obviously EOL (been out for 2 years, there have been consistently 4 battle packs for SW and we have the 2 new incoming ones) but 7913 is considerably harder (and more expensive) to find.
But in my area, both are the same price and available in large amounts.
I've actually been told this by more than one CPA, that one of the "tests" that a taxman will do is to see that if you followed your current accounting practices all the way out to the rollup of the business, would the taxman get their share of it all.
If the answer is yes, they are likely to accept whatever accounting system you follow.
It's a balancing act, of course. There are unpopular items that the stores would be glad to be rid of and probably wouldn't enforce purchasing limits. However, these targeted products are often popular and brisk sellers such that the store has the luxury of enforcing limits without risking revenue.
Where I think a lot of people probably get into trouble is not having kept track of expenses throughout the year... though even that can be easily maintained via a basic Excel document.
Now if the one customer is buying up ALL of my stock, great. If they're only cleaning me out of what's desirable, that's extremely bad for business.
I believe the tax exemption that was under discussion was specifically a reseller license. LBR haven't outrightly declared war on resellers, but I'm not surprised when I hear a decision has been rendered that is unfriendly to resellers.
http://en.wikipedia.org/wiki/Comparison_of_cash_and_accrual_methods_of_accounting
For those people talking about how to cheat the tax system, be careful! You are posting on a public forum. If someone really wanted to screw you over (and make no mistake, people in this thread are competitors), a few calls to the IRS would cause some headaches.
(CPA by day, AFOL by night)
The question is: Is the "tax man" hated more than the reseller? :)
My point is in no way invalid. Not allowing it absolutely deters people. Just because LFT doesn't mind the extra steps, does not mean everybody does. I personally would simply not shop at the LEGO Store.
And LEGO does care about resellers. It likely strongly detests them - they give the LEGO product a bad image, like it or not.
My point is in no way invalid. Not allowing it absolutely deters people. Just because LFT doesn't mind the extra steps, does not mean everybody does. I personally would simply not shop at the LEGO Store.
And LEGO does care about resellers. It likely strongly detests them - they give the LEGO product a bad image, like it or not.
The kinds of buyers that would be deterred by having to preform basic end of year accounting are not the people who are buying at the quantities we are discussing here.
Secondly, your last point is COMPLETE conjecture. Agree to disagree.
Resellers on the other hand just give themselves one as they stare in the mirror everyday counting all that money and then making it rain as they laugh maniacally for a good 5-10 minutes (I've always assumed that's what LFT does on a daily basis, please correct me if that's not the case!)
Understand I'm with you insofar as resellers taking advantage of an opportunity (whether that's good or not is certainly debatable), but to say they're harming LEGO's image seems ludicrous.
I agree. Lemme see. Collectible Minifigures should squash that argument.
I would never buy from a reseller that had lower prices than Lego had. It screams fraud to me. When buying from Lego, you also get exceptional service with their product.
Also how buying up Lego sets at deep discount and selling them at a smaller discount sounds fraudulent? This happens a lot, though not nearly on a big enough scale to even scratch Lego.
And yes, I'd gladly purchase from a legit looking reseller for 20-30% under RRP. In fact I do sometimes sell at such prices myself.
I don't see how you can sell 20-30% under rrp and make any money especially when there's 20% in just fees and shipping.
No seriously,i'm really curious to know when it will EOL,and especially how it will perform! Any wild guesses?