Inventory bought to resell belongs on Part III line 36, part iii line 36, purchases less personal use.
Why part iii line 36
Goods you buy to resell are not an expense when you buy them. Their cost goes into Part III, on line 36, purchases less cost of items withdrawn for personal use, and reaches the return only through cost of goods sold as the goods are sold. Anything unsold at year end sits in ending inventory on line 41 and reduces this year's deduction, which is why a big December stock-up does not cut your tax. There is no Part II line for it, so an entry on line 22 or line 27a for resale goods is misplaced and typically overstates the current year deduction.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for inventory bought to resell is already written down.
Start for freeWhat inventory bought to resell is confused with
- Line 22, supplies
- Line 22 supplies are items consumed doing the work, so packing tape used in the shop is supplies while the goods inside the box are inventory in Part III.
- Part III line 38, part iii line 38, materials and supplies
- Finished goods you buy and resell as they are go on line 36, while raw materials and components you transform into something else go on line 38.
- not deductible, not deductible
- Stock you take out of the business for your own use is removed from line 36 by its cost, which is exactly what the words less cost of items withdrawn for personal use mean.
Examples that belong on part iii line 36
- $14,000 of wholesale apparel bought for an online shop
- $3,200 of pallet-sourced goods for an Amazon reseller
- $800 of antiques bought at auction to resell
- A $45 item you kept for yourself: back it out of line 36
- $2,100 of stock still unsold on 31 December: ending inventory on line 41, not this year's deduction
What does not belong here
- Entering resale purchases on line 22 supplies.
- Entering them in Part V and carrying them to line 27a.
- Deducting the full year's purchases without counting ending inventory.
- Including inventory you have ordered but not yet received and do not yet own.
The limit that applies
A small business taxpayer under the gross receipts threshold may use a simpler method that treats inventory as non-incidental materials and supplies or follows its books, but the cost is still recovered when the goods are sold or used, never when purchased. The threshold is indexed annually, so check the current year's figure.
What to keep
Keep purchase invoices and a year-end physical inventory count with the cost of each item. The count is the number that makes Part III work, and reconstructing it later is close to impossible.
Related lookups
- Where do job materials go on Schedule C?
- Where do print on demand supplies go?
- Is a car payment deductible on Schedule C?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for inventory bought to resell is already written down.
Start for free