USA Dropshipping Business

[Alex Cordero]

Hello Everyone,

I apologize if this is not in the right location. I am starting a dropshipping business online that will give a portion of the proceeds to local non profit charities.

A customer buys a $20 tshirt on my website and I charge their card for $20. The order is sent to teelaunch a print on demand company that owns the inventory, they print the shirt and send it to the customer. Teelaunch charges my card $10 ( $5 for the shirt and printing and $5 for shipping).

I have two questions in this scenario:

1.) is the shipping in this situation considered cost of goods sold?

2.) if it is could I then proceed to state " we give 50% of the gross profits on the sale to an organization of your choice" meaning the organization would get $5 ($20 in sales - $10 cost of goods).

Thank you so much for your help! I really need this answer before I can go live with my business as I want to be as transparent as possible with the end customer on how much I am giving and make sure I am not misleading anyone.

 

[kirby]

1. Yes
2. Yes
and Thanks for making a difference in supporting charities

 

[Drmdcpa]

Freight in is generally considered inventoriable but freight out is usually considered SG&A.

Your freight is freight out.

With that said, since your vendor is charging the freight and drop shipping it thus saving costs of shipping to you (freight in) and then you shipping to customer (freight out), I would have to agree with the answer yes and yes.

But be prepared for the technical person that may challenge it should it ever arise.