--- title: "What Is Dead Stock in Inventory?" url: https://www.uncap.com/glossary/dead-stock author: "Denis Dyli" published: 2026-10-28 updated: 2026-10-28 summary: "Dead stock is inventory that has stopped selling: products that are rarely or never ordered and sit in the warehouse, taking up space and tying up cash until cleared. When goods can no longer be sold at normal prices because of damage, shop wear, changes of style or similar causes, the IRS calls them goods that cannot be sold." --- # What Is Dead Stock in Inventory? > Dead stock is inventory that has stopped selling: products that are rarely or never ordered and sit in the warehouse, taking up space and tying up cash until cleared. When goods can no longer be sold at normal prices because of damage, shop wear, changes of style or similar causes, the IRS calls them goods that cannot be sold. **Dead stock**: Dead stock is inventory that has stopped selling: products that are rarely or never ordered and sit in the warehouse, taking up space and tying up cash until cleared. When goods can no longer be sold at normal prices because of damage, shop wear, changes of style or similar causes, the IRS calls them goods that cannot be sold. ## How it works Dead stock is inventory that is rarely ordered or no longer sells at normal prices. Shopify notes that products like this can incur unnecessary warehousing, maintenance or advertising costs, and can tie up cash that could otherwise be put back into your store. Shopify's ABC inventory analysis shows where it tends to collect. The analysis grades products by their share of revenue: A-grade around 80 percent, B-grade 15 percent and C-grade 5 percent. Shopify says C-grade products are often considered dead or slow-moving inventory, although they still account for some sales and selling out of them can lead to a poor customer experience. For tax purposes, the IRS has its own heading for stock that can no longer be sold at normal prices: goods that cannot be sold. It names the causes: damage, imperfections, shop wear, changes of style, odd or broken lots, or other similar causes. The Treasury regulation adds second-hand goods taken in exchange. ## How dead stock is valued Compared with normal goods, unsellable stock follows its own valuation rule: - Finished goods: IRS Publication 538 says to value goods that cannot be sold at their bona fide selling price minus direct cost of disposition, no matter which method you use to value the rest of your inventory. - Raw materials or partly finished goods: value them on a reasonable basis, considering their usability and condition, and not for less than scrap value. - What counts as a selling price: under 26 CFR 1.471-2(c), bona fide selling price means an actual offering of the goods during a period ending not later than 30 days after the inventory date. The taxpayer carries the burden of proof and keeps records of how the goods were disposed of. This is general information, not tax or accounting advice. ## Example A distributor carries 2,000 SKUs with $300,000 of inventory at cost. Its reports show 120 SKUs with no sales in the last year, holding $18,000 at cost. - Share of SKUs: 120 / 2,000 = 6 percent - Share of inventory value: $18,000 / $300,000 = 6 percent One of those SKUs is a discontinued color: 40 units with damaged packaging. First, the distributor offers them at $5 a unit within 30 days after the inventory date. Disposal costs $1 a unit. The bona fide selling price minus direct cost of disposition is 40 x ($5 - $1) = $160. ## On Shopify As of October 28, 2026, three of Shopify's inventory reports help surface stock that has stopped moving: - Inventory remaining per product: days of inventory remaining is the ending quantity divided by the average quantity sold per day, based on the last 28 days. If a variant had no sales in the period, the value is set to N/A. - Products by sell-through rate: quantity sold divided by quantity sold plus quantity still in inventory, for the selected period. - ABC product analysis: grades each variant by its share of revenue over the last 28 days, so C-grade products stand out. Shopify says that if your store is on the Basic or Lite plan, you can download a reporting app with ABC analysis from the Shopify App Store. For C-grade inventory, Shopify suggests selling it at a discount and removing the product from your catalog after it sells out, giving it away free with other purchases, giving it to charity, ordering it less often or on a just-in-time basis, or stopping orders unless it serves another purpose for your business. ## How Uncap helps Uncap's guide to [managing large electronics catalogs](/post/managing-millions-electronics-skus) shows how dead stock builds up: each new device generation often leaves the previous generation's SKUs sitting in the catalog as slow-moving or dead stock. One fix it covers is SKU rationalization, the practice of regularly reviewing your entire catalog and deciding which SKUs earn their place, and it works best when it feeds back into purchasing decisions, not just catalog cleanup. ## Related terms - ABC analysis - Sell-through rate - Inventory turnover ratio - FIFO (first in, first out) - Economic order quantity (EOQ) - Cycle counting ## Sources - IRS Publication 538: Accounting Periods and Methods - 26 CFR 1.471-2: Valuation of inventories (LII) - Shopify Help Center: ABC inventory analysis ## Frequently asked questions ### What does dead stock mean? Dead stock means inventory that has stopped selling: products that are rarely or never ordered and sit in the warehouse, tying up cash and space until they are cleared. When goods can no longer be sold at normal prices because of damage, shop wear or changes of style, the IRS treats them as goods that cannot be sold, with their own valuation rule. ### What is another word for dead stock? Shopify's ABC inventory analysis guide uses the phrase dead or slow-moving inventory for low-revenue C-grade products. For tax purposes, IRS Publication 538 covers unsellable stock under the heading goods that cannot be sold. ### What are the causes of dead stock? For tax purposes, the IRS lists damage, imperfections, shop wear, changes of style, odd or broken lots, and other similar causes as reasons goods cannot be sold at normal prices, and the Treasury regulation also names second-hand goods taken in exchange. Shopify adds that rarely ordered, low-revenue C-grade products are often considered dead or slow-moving inventory. ### How do you dispose of dead stock? For slow-moving C-grade products, Shopify suggests selling them at a discount and removing them from your catalog after they sell out, giving them away free with other purchases, donating them to charity, or ordering them less often or not at all.