# Unused Shirts / Trash - how do I account for these for tax?



## spankthafunk (Apr 9, 2007)

What do I do with shirts for quality control for tax purposes? Shirts that are never sold, shirts that are mistakes, shirts that I bought for sale, but ended up practicing on, etc. What do I do with these shirts, and how do I pay taxes on them?


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## splathead (Dec 4, 2005)

Sales tax or income tax?


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## spankthafunk (Apr 9, 2007)

I guess both really. The first question would be Sales Tax. If I purchased the shirts tax free, but never sell them, how do I report the tax?

What would income tax purposes entail?


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## splathead (Dec 4, 2005)

Well, I know the answer to income tax, but I am not sure about sales tax. 

On income tax, it is a tax deduction as a business expense regardless if it was spoiled or sold. 

On sales tax my guess is, because you did not collect sales tax on the sale of the item, none are due. Remember you are merely the facilitator of getting sales tax from the consumer to the state. If you never collect it in the first place, then how could it be owed. BUT, I would consult your state tax authority for clarification.


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## coolnammy1 (Jun 19, 2008)

If you got these shirts printed through someone else, do take into account if they made you pay tax at the time or not.


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## spankthafunk (Apr 9, 2007)

splathead said:


> Well, I know the answer to income tax, but I am not sure about sales tax.
> 
> On income tax, it is a tax deduction as a business expense regardless if it was spoiled or sold.


that's good to know! I'm assuming everything business related is a write off, correct? (ink, emulsion, screens, squeegees, etc?)



splathead said:


> On sales tax my guess is, because you did not collect sales tax on the sale of the item, none are due. Remember you are merely the facilitator of getting sales tax from the consumer to the state. If you never collect it in the first place, then how could it be owed. BUT, I would consult your state tax authority for clarification.


this I guess is what I'm unsure about. I figured that since I bought it tax free, I still owe some sort of tax, whether the customer is paying for it or I'm paying for it. Anyone else have ideas?


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## Solmu (Aug 15, 2005)

This is speculation because I don't know your local tax code, but this is how I would _think_ it would work, as it does sometimes elsewhere: the end customer, which basically means the last person to buy the shirt, owes the state sales tax on it. If you sell the shirt on to a customer, that would be them. If you end up keeping it for yourself, you owe tax on the ones you didn't re-sell. You're only sales tax exempt because you're going to be re-selling - if you don't re-sell you owe sales tax.

That's how I think it works, not definitive. You should be able to get information from your local government, or failing that a tax professional (i.e. an accountant).


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## hamlettsigns (May 3, 2008)

It is called use tax here If you do not make the product that was bought tax free for resale then you pay use tax. Check in your area with your accountant or call the state sales tax office and they should be able to help you.


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## DTFuqua (Jun 26, 2008)

Unless you are in a place where the tax people are very greedy(aren't they all seems like), the you don't owe sales tax on unsold goods. I don't know of any way they could calculate and collect tax on unsold good. When I was dealing cars, my parts weren't taxable when they were not used. Now that being said, there are a lot of places that will place a tax on unsold goods yearly as part of some type of property tax. You should consult a tax professional in you area as taxes can change when crossing county and/or city boundaries.


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## COEDS (Oct 4, 2006)

I only pay sales tax on items sold. If the shirt is bad then it's not a sale. I throw most garments in a bin and log them as waste and take the write off on their cost. ..... JB


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## binki (Jul 16, 2006)

if you are in california, you would pay the sales tax on them based on the price you paid for them. you do this when you file your sales tax report to the boe.


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## Trimere_Ink (Jul 23, 2007)

In Massachusetts, most clothing is tax exempt. Normal wear clothing. Athletic clothing is taxable. Makes it slightly easier...though I keep a list around to reference for those unsure times.

You could always call your state's revenue office and ask specifically instead of fishing for advice on here. A safer bet IMO.


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## veedub3 (Mar 29, 2007)

I am in Georgia and you only owe slaes tax when the item sells. If it is un-sold no taxes are due.


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## spankthafunk (Apr 9, 2007)

thanks for all the great info! I'm going to call the local tax office and see what the deal is. I would think you would have to pay the tax on unsold goods, because I would think someone needs to pay that tax. We'll see though. I'm in FL btw


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## dalessandro12 (May 27, 2008)

spankthafunk said:


> thanks for all the great info! I'm going to call the local tax office and see what the deal is. I would think you would have to pay the tax on unsold goods, because I would think someone needs to pay that tax. We'll see though. I'm in FL btw


 
Probably best. I am in CA and am doing the State Board of Equalization tutorial on sales tax and here, it looks like you only pay sales tax on sold items.


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## reginammp62 (Jul 4, 2008)

spankthafunk said:


> What do I do with shirts for quality control for tax purposes? Shirts that are never sold, shirts that are mistakes, shirts that I bought for sale, but ended up practicing on, etc. What do I do with these shirts, and how do I pay taxes on them?


I know a lady who lives across the street from a custom designed t-shirt company and she buys the t-shirts with imperfections. She uses what she can to make other items such as pillows, small, medium, and large and also shorts etc. With the left over fabric, she cuts up and sells to companies as rags. Talk about recycling! The company gets rid of their unwanted, unusable shirts and she can generate some revenue for herself by buying these unused t-shirts in bulk for next to nothing! She told me that company has over $1mm in sales yearly. It's a privately held company that has lots of great images! 

-regina


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## Solmu (Aug 15, 2005)

I agree that it's unlikely you'd have to pay tax on unsold items. The key is that some of these aren't really unsold; they're sold to the decorator, who didn't pay tax on them at the time of purchase.


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## jeron (Jul 16, 2012)

The way it works here is if i sell the shirt to some one they have to pay the sales tax. If i don't sell the shirt to anyone and "use" it myself. whether that is for testing, rags, screw up, whatever i have to pay a Use tax. The percent is the same as sales tax. Basically the last person to use the shirt pays the tax, whether its them with sales tax or me with the use tax.


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