Do you consider your shipping expenses part of "cost of goods sold"?

[starlygirl]

Just wondered how other e-commerece businesses handled reporting their shipping/postage/freight expenses (to deliver goods to your customers) when doing end of year accounting & taxes.

I've been advised that I have two choices -

(1) consider my cost of postage to deliver goods to customers as part of my "cost of goods sold"

or

(2) list it as an overhead "office expense".

Which way do you choose to do it? Thanks!

[Rugles]

Incoming shipping costs are part of costs of goods sold.
Outgoing are an office expense.

Of course it all depends on your tax laws.

[martyt]

In the USA, as Rugles says, shipping expenses that you paid in acquiring goods to resell are a "cost of goods sold" expense.

Outbound shipping (as in "delivery to the customer") is just a regular expense - no different than office supplies, utilities, etc.

[starlygirl]

Thanks for the explanations. That makes a lot of sense :-)

[iJeep]

Funny, I just asked my accountant this today. He said that it didn't make a huge difference because if it is taken under COGS it comes out the same in the end as if you dedudct it as an expense. He did say it is good to keep it as a seperate COGS account so that it was easy to seperate it from actual product cost.

[moneymancn]

You might want to treat this as a separate expense,easily identifiable,so that you can make comparisons etc mom or yoy or qor or even to get an idea of the % cost shipping is in your total cost of sales.

MM