FORTUNE Small Business:

How to write off defective imports

FSB's Anne Fisher helps small-business owners get answers to their questions.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

imports.03.jpg
Ask FSB
Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
Your name:
* Your e-mail address:
* Your city:
* Your state:
* Your daytime phone #:
* Your questions:

(FORTUNE Small Business) -- Dear FSB: My scientific-supply firm imports many of its products from China. Upon checking my last shipment, I saw that about half of the goods had defects. I'm trying to make the vendor replace them or refund my money, but in the meantime, how do I document the goods' disposal to satisfy the IRS?

-Christopher Cameron, President
Sci-Supply
Cincinnati

Dear Christopher: To deduct the loss from your taxes, take the same steps you would if the goods came from, say, Akron - except that, in that case, you'd have no import duties to write off.

"Documentation is key," says Cym Lowell, a partner with Gardere, a Dallas law firm that handles international tax issues. "Photograph the merchandise to clearly show its defects. Keep copies of all letters you write to the vendor, indicating your efforts to get a refund or replacement."

Also, maintain records of what you paid for the merchandise and all receipts for its storage and disposal.

"As long as your files document each transaction detail, you're covered if you're audited," Lowell says. Should the vendor later make good, you'll have to declare the payment as income.

"In the future, request inspection certificates," says Laurel Delaney, CEO of GlobeTrade, a Chicago firm that advises entrepreneurs on overseas expansion. Having the merchandise inspected by a third party before it leaves China "offers proof that the shipment is correct, and in good condition," Delaney says. "It's worth the fee you'll pay to the inspector."

Ask your shipper to suggest a reliable inspection firm, or check with the U.S. Commercial Service in China. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.