Before, I start going into this, I just want you to know that I understand that some traditional types of crafts fall more into the artist category because of the level of skill or materials used. A handcrafted wooden chair can cost $100 or $10,000 (rising to the level of artistry) depending on the materials and techniques used. For this example, I’m going to use the broad example of an artist – that person in a smock holding a palette, painting on an easel.
However, I highly recommend you check with your tax return preparer or accountant first to see if they agree with the way you want to figure your cost of goods sold. From the return preparation cost standpoint, it’s cheaper to just do it the way your tax return preparer wants from the beginning. The less work the return preparer has to do when they get your info, the less money it will cost to do the return.
Typical Artist Cost of Goods Sold
Our lucky artist just got a commission to paint five abstract canvases for the lobby of a new corporate headquarters. What type of cost of goods sold expenses is this artist going to have? Common artist supplies are paints, brushes, mask, canvas and frames to stretch the canvas plus a whole lot more based upon the type of medium you use to paint. Please note, I didn’t include the easel or any other type of equipment you use to create your artwork. These items are long-lived assets, which should be depreciated and are not part of cost of goods sold.
Expensing as COGS Versus Taking Purchases to Inventory
I don’t think a prudent person would argue with the fact that most artist supplies except the canvas can just be expensed as you buy it. You buy a tube of Winsor and Newton titanium white paint for $7.00 in September, then deduct this as a cost of goods sold in September. That tube of paint may well last you months, but to figure out what percentage of the tube you used for what painting is nickel and diming it.
The only way I would attempt to pro-rate the cost of a tube of paint would be if it was extremely expensive. Everyone has a different opinion as to what is ‘extremely expensive’. My suggestion - if the tube of paint cost over $50, only expense as a cost of goods sold the actual paint you used for that one picture. Even then, my $50 benchmark might not apply because if you are painting a large canvas you’re going to use more paint. Use some common sense and talk to your accountant if need be.
Artist Supplies You Should be Adding to Inventory
The canvas is a trickier issue. You have to look at how you’re buying the canvas. Are you buying it in bulk and stretching it yourself or just buying pre-stretched canvas or paper pads as you need them? The key here is how much canvas or paper you keep in inventory.
Here’s two examples of how to figure the cost of canvas for our artist with the corporate headquarters commission:
- The artist goes down to the art supply store and buys five pre-stretched canvas pads in the correct size. All five cost $350. The cost of goods sold for the canvas is the same - $350.
In another scenario the artist likes to buy in bulk. Then, the cost of canvas would have to be pro-rated. Here’s how this plays out:
Going online, the artist can buy 50 feet of canvas for $150. 30 feet are needed for this project. The stretcher strips needed to make the canvas pads cost $25. What’s the cost of goods sold here? Well, it’s $150 for 50 feet which is $3 per foot. The artist needs 30 feet for the commission so total canvas cost is $90 plus the $150 for the bars equals $240.
Figuring Up the Total Cost of Goods Sold
What’s total cost of goods sold for this commission? It is the cost of all supplies used to produce the paintings. In this instance, the artist purchased paint for $100 and went with scenario #2 for the canvas. So the total cost of goods sold is $340 ($100 + $240).