How should this be recorded as a business?

mrhoni

Working with my Vet, I did a photoshoot of the vets and employees and their pets. The selected photos will be matted and framed for display on the wall in their clinic as advertising for me, while they get to show off their pets.

I just ordered the prints and will also buy the mats and frames. The vet will reimburse me for the cost of prints, mats, frames.

How would you record this expense and then reimbursement income? I think this is an advertising cost, but then is offset by reimbursement from the vet. :help

I was also planning to call the California State Board of Equalization regarding sales taxes as I don't know if I should purchase the materials with reseller certificate and not pay sales tax and then "sell" the prints/mats/frames at cost and include sales tax at that time. Exception is Smugmug/Bay Photo already charged me sales tax on the prints.

Sam

Obviously you would need to consult an accountant, but I would just log in the materials as cost of goods sold.

Inventory, you buy X amount of material throughout the year. You sell Y amount of inventory during the year. The amount of inventory used to produce the items sold is deducted as the cost of goods sold. The amount of remaining inventory is gain or profit.

You owe the state sales tax on your sales less any amount of sales tax you paid at the time of purchase.

Sam

lensmole

Purchase the material ,matting ,prints ,etc,allocate it to your appropriate account. Then bill him for the cost, taxes, plus a markup of 15 to 20 % for handling charges . Record it as a sale.

Photogbiker

I'll reiterate "see your accountant" to be safe, but fairly simple really. I'll go with Sam on this one. Just log in your costs as an expense, or Cost of Goods Sold. Then the money paid by your vet is not a "reimbursement", it is a sale. You just "sold" it for cost.

Now where I'll vary a bit is keying off Lensmole. If your vet pays you it is a sale, and you need to charge (and pay) sales tax. To save both of you some money have your vet go buy the mats and frames. Then your vet pays cost and records it as an office expense, you do some prints and record that cost as advertising expense, and you both save a buck. Nothing wrong with it, there truly was no "sale" or profit so the state does not deserve the tax. At the end it will probably cost same since vet will pay sales tax when they buy the frames (not for resale), but gets you out of the middle of it.