I must buy $50/mo in household products to receive commission on my referrals purchases. Can 100% be deducted?

Question

I'm a customer of a wellness company. I buy all toxin free household products from them and refer new customers to them. When my customers (and their customers for 7 generations) order, I receive a minimum of 7% commission on their purchases. Since I must place a montly order of $50 to keep this benefit, would I be able to write off all my household products of $50 * 12mos = $600 for the year?

Answer 1

Pyramid! Run away!

Answer 2

I agree with the person above, this sounds like a pyramid scheme.

That said, just because it's a minimum order does not make it a business expense, just a business inconvenience.

The real question is, if you're an entrepreneur, what are you, and 7 other generations after you, and presumably 7 generations before you paying $600 per year to, and what do you get in return? This is a pyramid scheme, people under you pay $600 per year, you get portions of that, people above you get portions of yours. The higher on the chain, the more you make, the lower the less.

At some point it will collapse, leaving the people at the very bottom poor, and they're the ones paying the most, because in order for everyone to make money from 7% they have to recruit more and more people, let's say each person gets 5 people, and so forth, the first person makes a load of money, but the 78 125 people at the bottom of the chain when it collapses lose their money, $600 per year, to a grand sum of the total of those people's losses being $46 875 000. Even if you just use the $50 per month those people at the bottom lose $3 906 250 together(considering 7 generations of this).

Get out now, call the cops, this is a scam, it's gonna crash eventually, don't be a part of it when it does.

I mean sure you get $273 437.50 in this scenario, but the people above you get more, the people below you get less. Someone makes a lot of money here. You're paying $600 per year into a scam that just makes other people rich. Someone at the top is making boatloads of cash and has no conscience.

Answer 3

You could set up a legal business entity (an S-Corp sounds ideal -- talk to an attorney/CPA to get good advice depending on your personal tax situation.) Then order the products through your business, then resell them and report the expenses (purchases) and income. (Put them on E-bay!)Pay tax on any profits and your good. You want to be careful -- you need to be able to show that this has the potential to be a legitimate money-making business if you ever get audited. IRS frowns (legally - frowning is bad!) on shell businesses set up for tax benefits that could/would never make a profit. Don't sell your product for less than you paid for it! :)

If you use the products personally, you can't write them off (even if you buy them through your business.)

You can also use some of your product purchases for product demonstrations -- these would be ligitimate losses. But you need to set up the business so it can still at some point make money. Your 7% commission may need to be paid to your business entity instead of you personally if you decide to do this. An S-corp avoids any double-taxation problems of a C-corp so your 7% commission should be taxed the same if you pay it to yourself or your S-Corp. But you can also make sales-trips and deduct them if you have an S-corp. You can deduct mileage on your car for business, etc....

Answer 4

No those products are for your personal use not a business expense.