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Old 07-24-2014, 04:21 PM
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Is it a business expense or is it something else?

A business expense is understood to mean something associated with the 'cost' of running your business. I am trying to understand how to handle something done on behalf of another person (either your household employer or your 1099-MISC job provider) that I actually don't think is a business expense but I'm not sure what it is either. Can someone help? Here's the scenario:

A teenager wants to operate a sole proprietorship and offer fruit picking services. The focus of the income into their business will be the service being provided (e.g. a labor service).

In order to provide this service, however, some fruit at an orchard must be purchased and then the customer would reimburse that purchase and then provide a service (labor) fee for the time spent picking. At this point I say "reimburse" because I cannot think of any other way to think about it. However, maybe there is a better term for what actually needs to happen in terms of accounting for it.

Important Caveat: Ultimately some fruit is being handed over to a customer. It would be entirely too complicated for a teenage business if that triggers an interpretation that what is going on here is the selling of a "product" (versus a service) and its corresponding additional hurdles of sales tax collection and reporting. I hope this can be avoided.

My question/concern is how actually to treat this as it doesn't seem like a business expense in the traditional sense.

I can think of several similar examples of good jobs for teenagers where they need to go buy something on behalf of another person (either as a household employee or as part of their own business service), but that they don't have that job provider's debit card or cash in hand and so the funds to purchase said items are effectively part of what they are doing as part of their sole proprietorship business (or in the case of a household employee out of their own personal funds).

I might have some follow up questions once I can get directed in the general area of understanding regarding what this 'thing' is that I'm trying to describe. Again, I don't think this is really a business expense as it's not an expense related to running the business (and if the scenario is a household employee buying something for their household employer there is no business that exists anyways so it can't be a business expense under that household employment scenario).

Thanks!



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