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prowlingbear

Accounting Question - Sale of Software Downloads

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prowlingbear    100
Anyone have knowledgeable input on accounting for sales of downloadable software?

Specifically:

[list][*]According to IRS publication 334, businesses involved in the sale of merchandise are generally required to account for inventory[*]Software on a server is not like widgets in a warehouse - there is no traditional inventory to be accounted for[*]Cost of Goods Sold - Applicable or not?[*]In a single-member LLC be treated as a disregarded entity for federal tax purposes in the U.S., how to handle expenses like money paid for game engine licenses or books purchased to facilitate understanding of new software tools and programming techniques?[/list]I know this is pretty specific stuff, but with the app-world exploding with new apps, I figure there must be a few other independent developers out there facing the same questions.

All of the books I've looked at are oblivious to the business of selling electronic goods online. I found some posts in the Intuit forums, but they seemed to be wild-guesses from questionable sources.

(BTW, It is my understanding that the IRS has the self-employed squarely in its sights for auditing, so these are things to have straight beforehand.)

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Tom Sloper    16063
[quote name='pbc' timestamp='1307243384' post='4819618'][list][*]According to IRS publication 334, businesses involved in the sale of merchandise are generally required to account for inventory[*]Software on a server is not like widgets in a warehouse - there is no traditional inventory to be accounted for[*]Cost of Goods Sold - Applicable or not?[*]In a single-member LLC be treated as a disregarded entity for federal tax purposes in the U.S., how to handle expenses like money paid for game engine licenses or books purchased to facilitate understanding of new software tools and programming techniques?[/list]I know this is pretty specific stuff, but with the app-world exploding with new apps, I figure there must be a few other independent developers out there facing the same questions.[/quote]
[list=1]
[*]Yeah, if you buy inventory in the traditional sense.
[*]Right.
[*]In this case, not.
[*]Business expenses can be listed. Books would be a valid research or training/educational expense. Even subscriptions to game developer magazine are deductible.
[/list]
I AM NOT A TAX ADVISOR OR CPA OR LAWYER. My answers do not constitute legal advice or tax advice.
Look, why don't you go to your local SBA office if you can't afford an accountant or tax preparer? The local SBA is there to help small businesses, that's their reason for existence. This country wants small businesses to succeed and help the economy grow.

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