Accounting and the Container Exemption

I got this tip recently in a seminar. I've never heard of it before, but I thought I'd pass it on because it makes sense

The logic behind containers being exempt is that the box, bag, carton, pallet and other packaging materials were bought for resale. They're essentially sold with the product to the customer - they're ingredients. But a sharp auditor might ask about the accounting for your packaging costs.

In order to be able to argue that the container is part of your product, you may want to account for it that way. In other words, the theory is that you should be including the cost of your packaging materials and containers in cost-of-sales or cost-of-goods-sold, where your other product costs are.

Now, if you're like most companies, those costs are probably being included in your sales and administrative expenses. And you might have some trouble convincing your CPAs of the sound, logical and insightful thinking behind this recommendation.

But it's worth considering to be able to reinforce why your packaging materials aren't taxable.

Note that you should check how the container exemption works in YOUR state. And DO talk this over with your accountants.

Sales Tax Guy
See disclaimer

Here's information on our upcoming seminars and webinars

And please don't forget to visit our advertisers!