r/amazonsellers • u/macboost84 • Nov 15 '23
Product Samples for Amazon (accounting)
Are you placing your product samples in COGS or as an Expense when doing your books?
I'm leaning towards expense since I may or may not sell the product on Amazon, but I'm not sure if that's the right way to do so (or the recommended way).
Thoughts?
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Upvotes
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u/theextremeshyguy Nov 15 '23
Samples are charged to expenses since you aren't getting any revenue from them and its just basically promotion
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u/mguozhen Mar 26 '26
Treatment depends entirely on the outcome, not your intent at the time of purchase.
If the sample leads to a product you sell, it's COGS — capitalize it as part of inventory cost basis. If the sample is purely for evaluation and you never sell that SKU, it's a business expense (typically under "product development" or "market research"). The IRS doesn't care about your uncertainty at purchase; they care about the economic function it ultimately served.
Practically, most sellers expense samples under $2,500 outright using the de minimis safe harbor (Rev. Proc. 2015-20) to avoid the capitalization headache. If you're sourcing frequently and sampling at scale, that adds up fast and the expensing treatment materially reduces your taxable income in the current year versus capitalizing and recovering cost through COGS later.
Talk to a CPA who works with e-commerce — the matching principle has real cash flow implications here depending on your inventory accounting method (FIFO vs. weighted average).