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> If you're buying "tax-free" from a supplier, that part goes "onto your books" when it goes into your inventory. If you don't put that part into a product and
by Kadin 4y ago
> If you're buying "tax-free" from a supplier, that part goes "onto your books" when it goes into your inventory. If you don't put that part into a product and sell it relatively quickly, you owe tax on that part as it sits on your shelf.
I admit to not being a CPA, but that... doesn't make a ton of sense to me. What sort of tax do you pay on inventory?
My understanding is that it's not tax that's the issue, but the tying-up of capital in inventory that's generally being minimized. If interest rates are 3% and you have $1M in inventory, that's $30k per year in interest you're paying in order to hold that inventory, plus the physical costs of warehousing it.
And the MBAs naturally look at cutting costs as the fastest and most direct route to improving profitability.
- bsder 4y ago> I admit to not being a CPA, but that... doesn't make a ton of sense to me. What sort of tax do you pay on inventory? Welcome to the US taxation system. As I understand it, VAT solves a lot of this silliness. However, the US doesn't do VAT for a bunch of historical reasons.
- gnopgnip 4y agoCost of goods are deductible against sales. But unsold inventory is not. So effectively it is taxed as business profit.
- daniel-cussen 4y agoCan't you sell it next year? And you know what? At some point somebody has to lose money to the tax collector. You can't deduct everything, can't shunt it all onto the customer (typically a leaf-node employee, someone at the bottom of an org chart). The business has to be profitable by enough that it can eat some taxation. Or what, you expect the orphan to do it instead? Has to push through friction for others. And plus, cost of goods of unsold inventory isn't that painful if you actually are making huge margins on it, like you ideally should, because you built a better mousetrap that was that much better that you could protect it from copycats with patents and therefore let everyone benefit enormously from it. In the end, the businessman must be creative. Must be an inventor, basically. Or a leader. And so in order to overcome that friction for the sake of the orphanage, the businessman must resolve friction in nature, some inefficiency of some sort, something that could be much better than it is. Something ineffective that could be effective. Plant a seed and reap two.
- MichaelZuo 4y agoYou are free to send extra money to the government if you truly believe in it.
- daniel-cussen 4y agoI actually went ahead and did already! And I'm going to do it again!