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April 29, 2005

By Fax (202-772-9204) and U.S.
Mail

Mr. George F. Ohsiek, Jr.

Branch Chief

Division of Corporate Finance (Mail Stop 03-08)

United States Securities and Exchange Commission

Washington, DC 20549

  Re:

  iParty Corp.

  Form 10-K for the fiscal year
  ended December 25, 2004

  File Date: March 25, 2004

  File No. 001-15611

Dear Mr. Ohsiek:

iParty Corp. (“iParty” or the “Company”) is responding to your letter
dated April 18, 2005 concerning our Annual Report on Form 10-K
for the fiscal year ended December 25, 2004 as filed with the Commission
on March 25, 2004.  For your
convenience, we have restated your comments in full in italics below and have
drafted our responses within the numbered comments and headings used in your
letter.  The additions and revisions
noted below will be included, as applicable, in an amended filing on Form 10-K/A
for the year ended December 25, 2004 and all future filings by iParty with
the Commission.  The Company’s filing of
the Form 10-K/A will be stayed pending any further comments you may
have, or confirmation that your office has no additional comments and that the
Company is thereby authorized to file its amended Annual Report on Form 10-K/A.

* * * * *

Form 10-K for the Fiscal Year Ended December 25,
2004

Item 7.  Management’s Discussion and Analysis of
Financial Condition and Results of Operations

Critical Accounting Policies

Inventory and Related Allowance for Obsolete
and Excess Inventory, page 11

1.                                       In future filings please disclose a rollforward
showing the activity in your obsolete inventory reserve either in the notes to
the financial statements or within Schedule II.  Also provide us supplementally with a
rollforward of your reserve for each period presented in a manner consistent
with the rollforward that would be required in the schedule of valuation
and qualifying accounts.

In our future filings we will disclose a
rollforward showing the activity in our obsolete and excess inventory reserve
in the notes to our financial statements.
Below, per your request, we are supplementally providing you with a
rollforward of our reserve for each period presented in a manner consistent
with the rollforward that would be required in the schedule of valuation
and qualifying accounts.

  Dec 25, 2004

  Dec 27, 2003

  Dec 28, 2002

  Beginning
  balance

  $

  1,400,262

  $

  1,394,349

  $

  637,770

  Increases to
  reserve

  200,000

  300,000

  $

  1,187,579

  Write-offs
  against reserve

  (303,407

  )

  (294,087

  )

  (431,000

  )

  Ending
  balance

  $

  1,296,855

  $

  1,400,262

  $

  1,394,349

2.                                       Please tell us more about the specific nature and
amount of each adjustment made to your estimates of vendor rebates, discounts,
freight and reserves for obsolete and excess inventory.  Please specify whether each change in
estimate resulted in an increase or decrease in earnings and in what statement
of operations line item the adjustments were reflected.

The net impact of adjustments made in 2003
for accounting for vendor rebates, discounts, freight and for estimating an
appropriate allowance for obsolete and excess inventory increased pre-tax
income by $141,757.  The specific nature
and amount of each adjustment is as follows:

We receive rebates from certain trade vendors,
typically associated with reaching purchasing volume thresholds.  We also receive purchase discounts from certain
trade vendors.  In 2003 we refined our methodology
for accounting for these rebates and discounts.
The refined methodology involves recording these rebates and discounts as
reductions to the value of our inventory as the related inventory is purchased.  We amortize these rebates and discounts into
cost of products sold as the related inventory is sold.  Adopting this refined methodology increased
our cost of products sold in 2003 by $86,660 for rebates and $67,389 for the
discounts described above.

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We also incur separately billed freight costs
from certain trade vendors.  In 2003 we refined
our methodology for accounting for these freight costs.  The refined methodology involves recording
these costs as additions to the value of our inventory as the costs are
incurred.  We amortize these freight costs
into cost of products sold as the inventory is sold.  Adopting this refined methodology reduced our
cost of products sold in 2003 by $95,806.

In 2003 we also refined our methodology for
estimating an appropriate allowance for obsolete and excess inventory.  This refined methodology involves estimating future
sales for each individual SKU based on historical selling rates for the
previous 52 weeks.  Should we own more
inventory than we expect to sell, we reserve for the write-off of this excess
inventory.  Adopting this refined methodology
reduced our cost of products sold in 2003 by $200,000.

Impairment of
Long-Lived Assets, page 12

3.                                       Your current policy of reviewing each store annually
for impairment does not appear consistent with the requirements of paragraph 8
of SFAS 144.  Please supplementally
confirm to us that you follow the guidance in SFAS and revise future filings to
clarify your policy.

In our annual report we inadvertently misstated
our current policy of reviewing for impairment of long-lived assets.  Our current policy is to review each store
for impairment indicators whenever events and changes in circumstances suggest
that the carrying amounts may not be recoverable from estimated future store
cash flows.  Our review considers store
operating results, future sales growth and cash flows.  We are not aware of any impairment indicators
for any of our stores at December 25, 2004.  The conclusion regarding impairment may
differ from current estimates if underlying assumptions or business strategies
change.

Per your instructions, we will revise our
future filings to clarify our policy in this respect.

Liquidity and
Capital Resources, page 14

4.                                       On December 25, 2004 you have approximately
$305,000 of additional availability under the line of credit.  Please help us better understand how you
calculate the availability under your line of credit agreement.  Specifically, help us understand the
difference between your reported accounts receivable and inventory and the “Acceptance
Inventory at Cost” and “Eligible Credit Card Receivables” used to determine
availability under the credit agreement.
Please

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tell us how you
intend to revise future filings to provide more clarity surrounding the
determination of your borrowing capacity.

Under our
line of credit agreement, our inventory and accounts receivable secure our line
of credit.  We borrow against these
assets at agreed upon advance rates, which may vary at different times of the
year.

Our inventory
consists of party supplies which are valued at the lower of weighted-average
cost or market and are reduced by an allowance for obsolete and excess
inventory and other adjustments, including vendor rebates, discounts and freight
costs.  Our line of credit availability
calculation allows us to borrow against “Acceptable Inventory at Cost,” which takes
our inventory at cost and reflects adjustments that our lender has approved
which may be different than adjustments we use for valuing our inventory in our
financial statements, such as the adjustment to reserve for inventory
shortage.  The amount of “Acceptable
Inventory at Cost” was $11,431,305 at December 25, 2004.

Our accounts
receivable consists primarily of vendor rebates receivables and credit card
receivables.  Our line of credit availability
calculation allows us to borrow against “Eligible Credit Card Receivables,” which
are the credit card receivables for the previous three days of business.  The amount of “Eligible Credit Card
Receivables” was $181,006 at December 25, 2004.

The total
borrowing base is then determined by adding the “Acceptable Inventory at Cost”
times an agreed upon advance rate plus the “Eligible Credit Card Receivables”
times an agreed upon advance rate.  The
total borrowing base at December 25, 2004 was $6,441,073.  Under the terms of our line of credit, this
amount was then further reduced by (1) 5% of the adjusted credit limit on
the total line of credit, (2) customer deposits, (3) gift
certificates, (4) merchandise credits and (5) outstanding letters of
credit.  Therefore, given our line of
credit limit of $7,500,000 our additional availability at December 25,
2004 was approximately $305,000.

Per your instructions, we will revise our
future filings to clarify our policy in this respect.

Index to Consolidated Financial Statements

Report of Independent Registered Public
Accounting Firm, page F-2

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5.                                       Please amend your filing and have your independent
accountants modify their audit report to comply with PCAOB Auditing Standard No. 1.  In particular, it is no longer appropriate to
refer to auditing standards “generally accepted” in the United States.  Rather, the audit report should describe the
PCAOB’s standards exactly as follows:  “the
standards of the Public Company Accounting Oversight Board (United States).”  Also have your accountants revise the first
paragraph of the opinion to state that the related consolidated statements of
operations, convertible preferred stock and stockholders’ equity (deficit) and
cash flows were audited for the three years in the period ended December 25,
2004 as opined on by them in the last paragraph.

We will amend our filing on Form 10-K
and have our independent accountants modify their audit report to comply with
PCAOB Auditing Standard No. 1 and modify the first paragraph of their
opinion, per your comments above.

Consolidated Statements of Operations, page F-4

6.                                       Please revise future filings to present only one
subtotal labeled “Income (loss) before income taxes” in order to avoid
confusing the reader.

Per your request, we will
prepare our future filings to present only one subtotal labeled “Income (loss)
before income taxes” in order to avoid confusing the reader.  The subtotal before Interest income and
Interest expense will be labeled “Income (loss) before interest and income
taxes” in our future filings.

Notes to Consolidated Financial Statements

Note 6, Income Taxes, page F-13

7.                                      Citing
the factors in paragraphs 20-25 of SFAS 109, please explain to us in
detail the positive and negative evidence you considered in determining that a
100% valuation allowance was appropriate as of December 25, 2004.  Also indicate what factors you have
identified that lead you to believe that the company’s recent trend of taxable
income may not continue.  Additionally,
please revise your MD&A in future filings to discuss in more detail the
basis for the valuation allowance and to highlight the judgments and
assumptions involved in evaluating the sufficiency of the valuation
allowance.  Please reconcile the
significant negative evidence as to expected future taxable income contemplated
by your 100% valuation allowance with the significant positive evidence for
continued favorable earnings disclosed in the Overview section of
MDA.  We may have further comments after
reviewing your response.

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The positive
evidence we considered in determining our valuation allowance included that (1) we
were profitable for the last two years due to the success of our Halloween
seasons (2) we achieved positive comparable store sales growth and improved
merchandise margins during these years and (3) we had a business plan that
projects profitability.

The negative
evidence we considered in determining our valuation allowance included (1) we
have been profitable for only two years and we have been unprofitable for the
first nine months of those years, (2) our operating income declined in
2004, (3) our operating profit margins were less than 2% of revenues in
each of these years, (4) our business plan projects similar profit margins
for the next several years, making our projected profitability vulnerable to
certain risks, including (a) the risk that we may not be able to generate
significant taxable income to fully utilize our $23 million NOL, (b) the
risk of unseasonable weather in a single geographic region, New England, where
our stores are concentrated, (c) the risk of being so dependent upon a
single season, Halloween, for a significant amount of annual sales and
profitability and (d) the risk of rising prices for petroleum products,
which are a key raw material for much of our merchandise and which affect our
freight costs, (5) the costs for opening new stores, which is part of our
business plan, will put pressure on our profit margins until these stores reach
maturity and (6) the investment in infrastructure required to support our
store expansion plan will increase our costs.

The negative
evidence is strong enough for us to conclude that the level of our future
profitability is uncertain at this time and we believe that it is prudent for
us to maintain our 100% valuation allowance until we have a longer track record
of profitability and we can reduce our exposure to the risks described above.

Per your instructions, we will revise our
future filings to discuss in more
detail the basis for the valuation allowance and to highlight the judgments and
assumptions involved in evaluating the sufficiency of the valuation allowance.

Note 17.
Quarterly Financial Data (unaudited), page F-22

8.                                       In future filings, please provide a measure of gross
profit as required by Item 302 of Regulation S-K.

Per your request, in future
filings we will provide a measure of gross profit in our Quarterly Financial
Data as required by Item 302 of Regulation S-K

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* * * * *

We acknowledge that:

•                  We are responsible for the adequacy
and accuracy of the disclosure in the filings;

•                  Staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filings; and

•                  We may not assert staff comments as a
defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

We appreciate your assistance and guidance in helping us to comply with
applicable disclosure requirements and will provide any supplemental
information you may require to better clarify our disclosures.  If you have any questions regarding our
response, please call me or Patrick Farrell, our President and Chief Financial
Officer.  We both can be reached at (781)
329-3952.

  Sincerely,

  /s/ Sal Perisano

  Sal Perisano

  Chairman of the Board

    and Chief Executive Officer

  Encls.

  cc:

  Patrick Farrell

    iParty
  Corp.

  Jaime Pereira

    Ernst &
  Young LLP

  Donald H. Siegel, P.C.

    Posternak Blankstein &
  Lund LLP

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