Need some advice on how to enter this in the books...

Hi. I need some advice on how to enter this in the books.



Here's the situation...



I've worked out an arrangement with a manufacturer in Vietnam to help them sell an electronics device in South America. I can give Vietnam a component (chip) that I buy from a company in China/HongKong. China ships it to Vietnam. Vietnam uses it to make their electronic gadget and sells it to South America.



Each gadget that Vietnam sells they give me a royalty.

Let's say the chip is $0.90/unit and I get a royalty of $10/unit.



If I buy 1000 chips from HK, I pay $900 + $100 S&H (to go from HK to Vietnam). HK give me an invoice for $1,000. I wire $1,000 and they send the chips to Vietnam. Every quarter Vietnam tells me how much they sell (i.e., 500 units) and I invoice them (i.e., $5,000).



A nice arrangement, but...



How do I show this in the accounting books?

And do I need to pay any type of use tax/reseller tax (my C corp is in California)?

Do the chips go on my books as inventory, or can I call it an expense and just report the royalty earnings?



So confused as to how to classify it.

Any ideas on how I should handle this?



Appreciate any help.

Thanks



Blaine



PS: I use Quickbooks Pro for Mac.