is value of inventory taxed
By deducting the value-of-inventory figure, you reduce your taxable income by as much as 88 percent (assuming a 12 percent average markup for inventory). You only pay taxes on your profits. Keeping track of your inventory costs reduces your tax bill by helping you arrive at a profit figure.
To figure taxable income, you must value your inventory at the beginning and end of each tax year. To determine the value, you need a method for identifying the items in your inventory and a method for valuing these items.