Have you ever noticed how stores run out of hot merchandise in December, especially toys, well BEFORE Christmas approaches?
One reason is that stores do whatever they can to sell off and not restock their merchandise through December 31st, because anything they do not sell by the end of the year will then be considered assets, and anything they do sell are expenses. From one website I read, “At a period end, inventory that was not sold during the period is shown as an asset on the balance sheet (Merchandise Inventory) and inventory that was sold is shown as an expense on the income statement (Cost of Goods Sold).” It’s in a store’s best interest (financially) to run out as much as possible before Christmas.
A private business owner friend shared this with me a couple years ago. He says he waits to buy new merchandise until the new year because anything he has that doesn’t sell by December 31st he has to pay taxes on. I believe him. Notice how many CDs and books that are listed on amazon.com and barnesandnoble.com right now that don’t have a release date until January sometime? I’m sure there are other reasons – but the merchandise tax is potentially one of them. [Read more…]