When you take something out of inventory for personal use, what you are doing is taking some of your equity out of the business. That inventory item has a value and that is what your equity is, the total value of cash and assets less debt.

But of course the State has thrown in a wrinkle – sales tax.

You do not get to take the item tax free.

You can of course take the item tax free, and if you were going to do that then all you need to do is bring up inventory adjust, set the adjusting account to owner equity drawing, and lower the qty of the items taken.

But to be technically correct, it is a little more involved.

* Create the owner name as a customer.
* Create an other charge item called personal use, and set the account to the owner equity drawing account and mark it non-taxable (if you have more than one owner you need one for each owner).
* Now the real pain, for each item being taken out of inventory, bring up the item screen and write down the average cost for that item.
* Create an invoice and list the items being taken out for personal use, with the owner as the customer. Each item should show as taxable, and the invoice should be marked as taxable. In the rate column enter the cost of the item and of course how many of each in the quantity column. Write down the total that does not include sales tax.

There is a trick to doing this if there are a lot of items to add up, set each line item to non taxable, the invoice will total them, write that number down, then go back and set each line item to taxable.

* Use the main menu Customers> Create Credit Memo/Refunds. Select the customer and then in the item enter the personal use item you created and a quantity of one, and the total you just wrote down.
* When you click save you get an option, select apply to invoice and click OK. Insure the check mark is next to the correct invoice and click Done.
* Now the invoice will show the amount due as the sales tax amount, have the owner write a check for that amount and receive it against the invoice as you would any other payment.