Denis Posted February 2, 2012 Share Posted February 2, 2012 I was reading up on my tax law and came across this principle: 4. Bad Debts If someone stiffs your business, the bad debt may or may not be deductible -- it depends on the kind of product your business sells. Goods. If your business sells goods, you can deduct the cost of goods that you sell but aren't paid for. Services. If, however, your business provides services, no deduction is allowed for time you devoted to a client or customer who doesn't pay. From what I understand selling a snack and not getting paid for it is the exact definition of bad debt. Is this something we can use to deduct our shortage or are we already deducting it through our cost of goods? Link to comment Share on other sites More sharing options...
dogcow Posted February 2, 2012 Share Posted February 2, 2012 I was reading up on my tax law and came across this principle: 4. Bad Debts If someone stiffs your business, the bad debt may or may not be deductible -- it depends on the kind of product your business sells. Goods. If your business sells goods, you can deduct the cost of goods that you sell but aren't paid for. Services. If, however, your business provides services, no deduction is allowed for time you devoted to a client or customer who doesn't pay. From what I understand selling a snack and not getting paid for it is the exact definition of bad debt. Is this something we can use to deduct our shortage or are we already deducting it through our cost of goods? you need to hire a good accountant, most retail business have shrinkage usually employee theft as far as i know these losses are deductible but u need an accountant. Link to comment Share on other sites More sharing options...
mission vending Posted February 4, 2012 Share Posted February 4, 2012 I was reading up on my tax law and came across this principle: 4. Bad Debts If someone stiffs your business, the bad debt may or may not be deductible -- it depends on the kind of product your business sells. Goods. If your business sells goods, you can deduct the cost of goods that you sell but aren't paid for. Services. If, however, your business provides services, no deduction is allowed for time you devoted to a client or customer who doesn't pay. From what I understand selling a snack and not getting paid for it is the exact definition of bad debt. Is this something we can use to deduct our shortage or are we already deducting it through our cost of goods? My first reaction is that the answer is in two parts. The cost of the missing product is in the cost of goods. Now for the remainder, lets say that the missing bad of chips cost .25 and you would sell it for .50. So you are short .25 but that .25 mark up is due to the "service" you are providing by acquiring the product and delivering it to the location. So my opinion is that the value added "services" would not be deductable but I'm not an accountant so don't believe everything I tell you. Link to comment Share on other sites More sharing options...
Denis Posted February 5, 2012 Author Share Posted February 5, 2012 My first reaction is that the answer is in two parts. The cost of the missing product is in the cost of goods. Now for the remainder, lets say that the missing bad of chips cost .25 and you would sell it for .50. So you are short .25 but that .25 mark up is due to the "service" you are providing by acquiring the product and delivering it to the location. So my opinion is that the value added "services" would not be deductable but I'm not an accountant so don't believe everything I tell you. I had a similar thought process. I will need to check. Link to comment Share on other sites More sharing options...
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