IRS Tax Issues with Business Inventory

Inventory is the merchandise that a business owns and sells to customers in the normal course of doing business. Small business owners who sell goods and products--as opposed to services only--deal with inventory. In addition to the finished product, inventory includes the raw material and unfinished items which have not yet been sold. There are IRS rules on how to value inventory and special IRS rules for deducting inventory costs.

If your business deals in inventory, you'll need to understand what inventory is, how to track and manage inventory and inventory costs, and the IRS rules that apply to inventory. This section gives an overview of some of these inventory issues and provides resources so you know how to properly manage this important asset. 

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