I seem to remember that the IRS changed the tax law on book publishers in the late '70s. Before the change, publishers made large printing runs of well respected texts and kept the unsold and warehoused books on their ledgers as raw materials. The IRS changed the law and required the unsold books to be counted as assets at the wholesale price, and taxes paid on those assets. This started the current new-edition-every-year model of publishing textbooks that has spiraled into the current situation.
Can you share a bit more information about this? I was unaware that assets sitting in a warehouse were taxed at all. Indeed, assets are typically depreciated in order to claim tax deductions.
I wish I could be definitive. This the explanation I was given by one of my professors. As I understand it most large businesses use accrual accounting, instead of cash accounting that a small business might use. In accrual accounting money is recorded in the ledger (I would say put on the books, but that could be confusing given the topic.) when a sale is made, even though the cash may not have yet been received. So, you have a profit on paper even though you don't have the cash in hand. The IRS ruled that all the books the publisher printed had to go in the ledger at face value when printed instead of waiting for a sale. That means that on paper, via accrual accounting, there is a profit that is taxed whether the publisher has the cash in hand or not. Publishers could record sales and make there quarterly tax payments knowing that they would get the cash in hand next quarter, but recording the printing of the books as sales and paying taxes that quarter when they might not actually sell the books for years was to much of a burden. Publishers started producing just the number books they thought they would need for the year. And, next year, if you are setting up a whole new printing run why not make corrections and updates, that is, print a new edition.
