Shipping costs - are these tax deductible/can it be written off as an expense?

[Limmer]

Hi there, first time posting as I cannot find this question answered thus far.

The company I work for is about to launch an e-commerce website in the coming months serving both the domestic and overseas markets. Shipping costs are a big factor in being competitive online and it is the company's preference to offer free shipping on all domestic orders, and possibly supplement the costs of international shipping. My question is can shipping costs be written off as an expense on the books? Our accountant has advised that it can and that it would be entered as an expense deductible against tax at year end. I know that with some carriers you forward buy blocks of shipping in bulk so you are just paying one invoice, while with others you pay 'per shipment'. Can anybody shed any light on this?

Thanks!

 

[dublin66]

I wouldn't see any issue or difficulty with shipping costs - the basic test for whether an expense is whether it is wholly and exclusively incurred for the purposes of the trade. While this may sound overtly technical (and it probably is) it is saying it is an expense of the business and it is only incurred for business purposes. I don't see any issue with shipping expenses on this basis. Vat issues, in my view, would be a lot of more significant for your business.

 

[Limmer]

Cheers for the reply dublin66. Yes this is pretty much what our accountant advised, I just wanted a second opinion. He said shipping was a business expense regardless of whether it is used for shipping to customers, posting letters to suppliers or making returns. It's all treated the same.

What VAT issues do you refer to, as I'd like to query him on this?

 

[dublin66]

The main vat issue I would consider important is where vat is going to be charged and paid. The distance selling regulations and the place of supply rules may be relevant.

Cross border sales typically bring complex enough vat issues.