USA Owner selling himself a product he produces

[niknak]

I just started a sole-proprietor business as a metalworker. I buy raw materials, make something from them, and sell the finished product to a customer. In this case I've made something that I want to keep for my personal use. Can I just sell the item to myself and treat the sale as any other sale in my accounting software, or is this considered an owner's draw?

 

[Werner Reisacher]

The answer is yes, you have to purchase the goods from your business, by either transferring the funds from your personal bank account into the account of your business (debt: Cash/Bank Credit: Sales, or by borrowing the funds from your business (Debit: owner liability account Credit: Sales.
The issue you have to look into is the Sales/Use tax. Depending on the State you are doing business in, you might have to pay a use tax on the goods that you purchased tax-free from the business since your business is probably exempt from Sales Tax.

 

[niknak]

Thanks for the reply! I considered selling myself the product for the cost of the raw materials plus local sales tax to cover the use tax issue. Does that seem reasonable?

 

[Werner Reisacher]

Selling to you at the cost you paid to procure the material is ok. If your State allows you to include the use tax transaction in your business's Sales tax filing, that would be another way to address the issue.
The following URL might be helpful.

is use tax part of sales tax filing - Google Search

 

[uzair dc]

I just started a sole-proprietor business as a metalworker. I buy raw materials, make something from them, and sell the finished product to a customer. In this case I've made something that I want to keep for my personal use. Can I just sell the item to myself and treat the sale as any other sale in my accounting software, or is this considered an owner's draw?

hy dear
this would be treated as drawing
DRAWING A/C DEBIT
TO PURCHASES A/C

 

[Werner Reisacher]

Thank you Uzair. Since it is actually not recorded as a sale transaction, the business that purchased the material has to handle the use tax issue.

 

[TaxDevil]

If you are preparing a tax return then on the cost of goods it would be inventory withdrawn for personal use. Basically what it is doing is making sure you don't charge it as a business expense.

 

[Asha Kanta Sharma]

You can also take and use it for personal in which case your capital account would be debited and inventory would be reduced by that amount using Stock Journal or similar entries in the books of accounts. Depending on prevailing laws and regulations most probably you would not be able to take input tax credit on the SKU taken for personal use.