What expense category is point of sale systems?

Point of sale (POS) systems are essential tools for businesses that handle transactions. Knowing how to categorize these expenses helps keep your financial records accurate and compliant.

Classifying point of sale system expenses

Now where do you put point of sale system expenses when filing? Here are the general categories they tend to fit into.

• Hardware expenses: Costs for physical components like terminals, card readers, and receipt printers. These are often considered equipment expenses and can be capitalized and depreciated over time.
• Software expenses: Fees for POS software applications and inventory management systems. These costs can be capitalized and amortized over the software's useful life.
• Installation and setup costs: Expenses for professional installation and setup services. These are typically recorded as professional services expenses and expensed in the period they occur.
• Ongoing maintenance and support: Costs for regular maintenance and support services. These are also classified as professional services expenses and expensed when incurred.
• Card processing fees: Fees charged by payment processors for each transaction. These are operational expenses and should be tracked separately for accurate accounting.

Examples of point of sale system expenses

Now that you know the categories, let’s look at some specific examples to help you understand what we’re talking about:

• Purchasing hardware: Buying new POS terminals and peripherals like barcode scanners and cash drawers.
• Software subscriptions: Monthly or annual fees for cloud-based POS software platforms.
• Installation services: Paying a technician to set up and configure your POS system.
• Maintenance contracts: Agreements for ongoing technical support and system updates.
• Transaction fees: Charges from payment processors for processing customer payments.

For instance, if you spend $2,000 on new POS terminals, this amount would be recorded as a hardware expense and capitalized on your balance sheet.

Tax implications of point of sale systems

Knowing the tax implications of your POS system expenses helps you navigate the complexities of tax season and empowers you to maximize your deductions and keep more money in your pocket.

• Capitalizing expenses: Hardware and software costs that are capitalized can be depreciated or amortized over several years, potentially providing tax benefits.
• Deducting professional services: Installation, setup, maintenance, and support expenses can often be deducted in the year they are incurred as ordinary business expenses.
• Recording transaction fees: Card processing fees are deductible operating expenses and should be accurately recorded to claim the appropriate deductions.

Consulting with a tax professional ensures you're taking full advantage of available deductions and complying with tax regulations.

Let Ramp automate your expense process

Managing and categorizing POS system expenses doesn't have to be a hassle. Ramp can automate the tracking and management of these costs, making it easier to keep your financials organized. With Ramp, you can streamline expense categorization and focus on running your business.