Painting & Coating Industry (PCI) logo Powder coating summit logo
search
cart
facebook twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
Painting & Coating Industry (PCI) logo Powder coating summit logo
  • NEWS
    • Latest News
    • Market Trends & Reports
    • Price Alerts
    • Subscribe to eNewsletters
    • Global Top 10/ PCI 25
    • Weekly Featured Article
    • COATLE Word Game
  • PRODUCTS
    • Product News
    • Must See Products and Services
  • MATERIALS
    • Additives
    • Resins/Polymers
    • Pigments
    • Equipment
    • Distributors
  • TECHNOLOGIES
    • Adhesives
    • Architectural Coatings
    • Industrial Coatings
    • Nanotechnology
    • Powder Coatings
    • Solventborne
    • Special Purpose Coatings
    • Sustainability
    • UV Coatings
    • Waterborne
    • FINISHING
      • Finishing News
      • Finishing Technologies
      • Finishing Equipment
    • RESOURCES
      • Columns
        • Ask Joe Powder
        • Did you know?
        • Distribution Dive
        • Focus on Canada
        • Formulating With Mike
        • Innovation Insights
        • Moody's Coatings Conundrums
        • Powder Coating Perspectives
        • Target the Market
        • TiO2 Insider
      • Blogs
        • Editor's Viewpoint
        • Industry Insights
      • Coatings Supplier Handbook
      • Podcasts and Videos
        • COAT-IT! Podcast
        • Videos/PCI TV
      • PCI Store
      • Classifieds
      • eBooks
      • Sponsor Insights
      • White Papers
      • COATLE Word Game
    • EVENTS
      • Coatings Trends & Technologies Summit
      • Paint and Coatings Academy
      • Webinars
      • Calendar of Events
      • Lifetime Achievement Award
    • DIRECTORIES
      • Buyer's Guide
      • Equipment Directory
      • Materials Directory
    • EMAGAZINE
      • Current Issue
      • eMagazine Archive
      • China Issue Archive
      • Editorial Advisory Board
    • CONTACT
      • Contact Us
      • Advertise
      • Subscribe to eMagazine
      • Subscribe to eNewsletters

    A Quick, Simple Solution to Excess Inventory

    October 23, 2000
    Excess, nonmoving inventory of paint, stain, adhesives and related products is a widespread and nagging problem. However, many manufacturers are unaware of a quick, simple solution. By donating that new, idle merchandise to charity, your company can earn a federal income tax deduction under Section 170 (e)(3) of the U.S. Internal Revenue Code.

    The IRS Code says that regular (C) corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair market value. Deductions may be up to twice cost.

    Let’s say you’re a paint manufacturer (and a C corporation) who makes latex house paint that costs you $5 a gallon. Your selling price is $10 per gallon. Your deduction is $7.50 per gallon. If the markup is considerably higher, deductions are limited to twice cost.

    If you are an S corporation, partnership or sole proprietorship, you qualify for a straight cost deduction. Even if your business realizes only a straight cost deduction, it may be to your advantage to donate your stagnant inventory rather than clear it through a liquidator. Since a liquidator looks for the lowest price they can get, their offer may be less than your cost — substantially less.

    Investigate donating inventory before negotiating with a liquidator, however, to be able to justify the product’s fair market value with the IRS.

    Besides the tax deduction, your company can realize other benefits by donating excess inventory.

    • Free up needed warehouse space. Whether you own your warehouse or are renting space, storing product can be expensive. Insurance, utilities, labor and damage all factor in. It doesn’t pay to hold stagnant inventory that isn’t earning its keep, especially if the clock is ticking on its shelf life.

    • Get down to just-in-time inventory. If your business is a supplier trying to trim its inventory levels enough to achieve just-in-time delivery, these nonmovers may be one of your biggest obstacles. Donating clears them out quickly.

    • Put your marketing focus where it should be: on your top sellers. Nonmoving inventory can consume a disproportionate amount of your business’s money, time and effort to clear it. By donating those items to charity, your company can put your advertising and promotional dollars where they’ll do the most good, on your star performers.


    • Avoid problems involved with liquidating those overstocks. Liquidators tend to pick and choose. They may not want to buy all of your nonmovers, leaving you with the problem of what to do with the leftovers. Donating can often clear all of your problem products at once.

    • Help deserving schools and nonprofit organizations. This good deed can translate into good will. You might ask the recipient group to call the local newspaper to publicize the donation. While a “grip and grin” photo of you presenting the donation might bring in additional business, keep in mind that it also may produce requests from other groups for donations, too. If you decide to go ahead with publicity, have a diplomatic answer prepared in case other groups call.

      After you‘ve consulted with your accountant or tax adviser and jointly decided that donating inventory would be the right move for your business, how do you identify which merchandise to clear? Here are some types of products to consider:

    • Slow-selling or nonmoving stock keeping units (SKUs). Just as it is dangerous to fall in love with a stock or mutual fund and be reluctant to unload it when it is not performing, it is equally unwise to fall in love with stagnant inventory. Wholesaler/distributors especially are aware of the need to constantly review their offerings, weed out the slow-movers, and concentrate on top-selling items.

    • Unsuccessful product introductions. Some new products simply do not move. By donating them, instead of selling them to a liquidator, your business will do better on the bottom line and will keep them from competing against you at cut-rate prices.

    • Discontinued formulations or colors. If you phase out a line of paint, you can donate leftover inventory to keep it off the market. The same holds true for discontinued colors.

    To earn this deduction, make sure that the nonprofit recipient is a 501 (c)(3), since only that IRS classification of nonprofits qualifies. Public or private (nonprofit) schools may also qualify to receive these goods. Be prepared to furnish the recipient groups with material safety data sheets (MSDS) for the donated product.

    Have your accountant or tax adviser instruct the recipient group as to what information it needs to include in the documentation it furnishes you as proof of the donation. You will include the recipient’s letter on your corporate tax forms as support for claiming the deduction.

    If your business has a small quantity of merchandise to donate, select the recipient(s) carefully to avoid the appearance of favoritism. By the same token, if you have a large quantity of product (a semi-trailer or more), instruct the recipient groups that under IRS regulations, donated merchandise may not be bartered, traded or sold. Charities or schools may not auction or sell donated merchandise to raise cash.

    For more information on donating excess inventory, contact NAEIR’s Corporate Relations, NAEIR, Suite 111, 315 S. 48th St., Tempe, AZ 85281; phone 800/289.4551; e-mail donor@naeir.org; or visit www.naeir.org.

    Links

    • NAEIR

    Share This Story

    Looking for a reprint of this article?
    From high-res PDFs to custom plaques, order your copy today!

    Recommended Content

    JOIN TODAY
    to unlock your recommendations.

    Already have an account? Sign In

    • PCI-0724-Global10-Feature-1440.png

      2024 Global Top 10: Top Paint and Coatings Companies

      Who ranks on top? PCI’s annual ranking of the top 10...
      Global Top 10 and PCI 25
      By: Courtney Bassett
    • PCI-0724-PCI25-Feature-1440.png

      2024 PCI 25: Top Paint and Coatings Companies

      PCI's annual ranking of the top 25 North American paint...
      Global Top 10 and PCI 25
      By: Courtney Bassett
    • pci1022-Kinaltek-Lead-1170.jpg

      A Novel Pigment Production Technology

      Following an extensive R&D program that demonstrated...
      Paint and Coating Pigments
      By: Jawad Haidar and Nitin Soni
    You must login or register in order to post a comment.

    Report Abusive Comment

    Manage My Account
    • eMagazine
    • eNewsletter
    • Online Registration
    • Subscription Customer Service

    More Videos

    Sponsored Content

    Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the PCI audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of PCI or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

    close
    • Modern arapartment complex painted in bright colors.
      Sponsored byEPS - Engineered Polymer Solutions

      Architectural Polymers Leading the Way in Coatings Innovation

    • paint sprayer in a workshop
      Sponsored byallnex

      Enabling Performance and Compliance: allnex Introduces a New Line of VOC Exempt Solvent-Borne Resins

    Popular Stories

    No. 3 AkzoNobel

    AkzoNobel to Close Two Manufacturing Sites

    BASF SE Logo

    BASF Reportedly Eyes Exit from Coatings

    Modern living room interior with green plants, sofa and green wall

    Reimagining Architectural Paints with Plant-Based Acrylic Binders



    PCI Buyers Guide

    Submit a Request for Proposal (RFP) to suppliers of your choice with details on what you need with a click of a button

    Start your RFP

    Browse our Buyers Guide for manufacturers and distributors of all types of coatings products and much more!

    Find Suppliers

    Events

    September 3, 2025

    Coatings Trends & Technologies Summit

    The Coatings Trends & Technologies (CTT) Summit is an annual conference for both liquid and powder coatings formulators and manufacturers to discuss innovations in coatings technology. This event combines high-quality technical presentations, a resource-rich exhibit hall, and dedicated networking opportunities to connect scientific minds, foster innovation, and cultivate game-changing new ideas!

    January 1, 2030

    Webinar Sponsorship Information

    For webinar sponsorship information, visit www.bnpevents.com/webinars or email webinars@bnpmedia.com.

    View All Submit An Event

    Poll

    Longest-running laboratory experiment

    What is the longest-running laboratory experiment?
    View Results Poll Archive

    Products

    CTT Summit Short Courses (Live 9/3/25)

    Coatings Trends & Technologies Summit is expanding its offerings with four short courses. These short courses will offer an extensive day of interactive learning.

    See More Products
    pci  webinar april 2025

    PCI CASE EBOOK

    Related Articles

    • Nano-Sanity: A Solution to the Coatings Dilemma

      See More
    • Quick, Easy, Accurate, Meaningful: What a Viscosity Measuremen Should Be

      See More
    • wilden pumps

      High-Performance Coatings Manufacturer Finds a Reliable Solution in the Form of AODD Pumps

      See More
    ×

    Keep the info flowing with our eNewsletters!

    Get the latest industry updates tailored your way.

    JOIN TODAY!
    • RESOURCES
      • Advertise
      • Contact Us
      • Directories
      • Store
      • Want More
    • SIGN UP TODAY
      • Create Account
      • eMagazine
      • eNewsletters
      • Customer Service
      • Manage Preferences
    • SERVICES
      • Marketing Services
      • Reprints
      • Market Research
      • List Rental
      • Survey & Sample
    • STAY CONNECTED
      • LinkedIn
      • Facebook
      • Youtube
      • X (Twitter)
    • PRIVACY
      • PRIVACY POLICY
      • TERMS & CONDITIONS
      • DO NOT SELL MY PERSONAL INFORMATION
      • PRIVACY REQUEST
      • ACCESSIBILITY

    Copyright ©2025. All Rights Reserved BNP Media.

    Design, CMS, Hosting & Web Development :: ePublishing