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TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 15723
Experience:  International tax
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If a carpenter buys materials ie a kitchen worktop which are

Customer Question

If a carpenter buys materials ie a kitchen worktop which are charged onto a client on their invoice does the cost of the materials get classified as cost of goods sold or under an expense heading of materials (or other business expenses on a tax return)? My understanding of cost of goods sold is that it relates to inventory held which does not apply in this case. I have searched the internet and there seems to be conflicting opinions on how this should be dealt with. Presumably when the carpenter buys nails etc it would be impossible to put the cost against a specific job and would therefore just go as an expense. Getting myself confused, please help! Also the same applies to labour - if the carpenter employs the services of another self employed carpenter to help with a particular job - is this cost of goods sold or does this go under wages and salaries on the tax return?
Submitted: 1 year ago.
Category: Tax
Expert:  TaxRobin replied 1 year ago.
HelloIf you pay another you would list that as contract labor and do not forget to issue a 1099MISC of you pay them $600 or more in the tax year.The costs for the job would be under materials. You are selling your service not the finished cabinets.After you view my response, please post below if you need more information or if you need no further clarification a positive rating is appreciated.I know rating takes an additional step and I truly appreciate it when you take the extra time!
Customer: replied 1 year ago.
So all materials purchased go as an expense not as cost of goods sold?
Expert:  TaxRobin replied 1 year ago.
That is correct.