Please bear with me I am new at this, and this is a debate with a friend that I really need someone else's thoughts on before I go to a professional.

Say you started your business last year and bought $1000 worth of merchandise. During the year you sold $750 worth of merchandise (cost) making it $1500 in sales. So $250 worth of merchandise still remains.

For sales tax do you pay on $1500 (sales) or $750 (difference between cost and sales, ie Profit if you have no other expenses), or other?

I am not too worried about federal taxes because I operated at a loss but hoping that will change this year.

edit - I just realized I put this in the wrong forum, sorry

Your profit would be the $500 (difference between $1000 inventory and $1500 sales. The remaining inventory is a cost of goods sold, and counts against your profit. That's for the purpose of business tax (i.e. sole proprietor passes through to your personal taxes). For SALES tax purposes, you would figure it on the $1500 because that's the amount of the sale.

It was the sales tax purpose that I was really trying to get at.

Cost of goods sold is confusing to me as well at this time, but I hope I understand it by the end of accounting.

Good luck, upper level accounting classes are not fun.

I am actually looking forward to them, even as confused as I am by some things.

Are you sitting for the CPA exam after graduation? If you're persuing (sp?) a 4 year degree then I would recommend it.

Actually, the clases are for Business Management. And the plans are to finish a four year degree in roughly, say... another 12 years

I take classes when I can, and keep plugging away, sometimes ready to quit, but on I go.