Amazon, Shopify, Etsy and similar platforms pay you in lumps that combine sales, refunds, fees, advertising and shipping. If you record the deposit as income, your books will be wrong. Good e-commerce bookkeeping separates the pieces so you can see true margins and file accurate taxes.
1. Record gross sales, not payouts
Each payout should be broken into gross sales, fees, refunds, advertising, shipping charges and reserves. Use a clearing account so that deposits reconcile to the bank statement after the platform's settlement report has been posted. Tools such as A2X or Link My Books can automate this, or a bookkeeper can post it from the settlement reports each month.
2. Track inventory and cost of goods sold
COGS is one of the largest numbers on an e-commerce income statement. It should include the product cost, freight in, duties and customs, and any prep or packaging that is part of getting the product ready to sell. Choose an inventory method (FIFO is common), apply it consistently and reconcile your system's inventory value to physical counts at least quarterly. Inventory you bought but have not sold is an asset, not an expense.
3. Understand sales tax nexus
Since the Supreme Court's Wayfair decision, states can require remote sellers to collect sales tax once they pass an economic threshold. A common threshold is $100,000 in sales or 200 transactions in a state, but states differ and some have changed their rules. Marketplace facilitator laws mean platforms like Amazon often collect and remit tax for you on marketplace sales, but sales through your own website generally remain your responsibility. Review nexus at least twice a year.
4. Watch 1099-K reporting
Payment platforms report certain payments on Form 1099-K. Under current law the federal threshold is $20,000 and 200 transactions, although some states set lower thresholds. A 1099-K shows gross payments, which will not match your net income. Reconcile the form to your own sales records so that the figures on your tax return are defensible.
5. Handle refunds, chargebacks and returns
Record them as contra-revenue or in a dedicated account, not as random expenses. Returned inventory that can be resold should go back into inventory at cost.
6. Separate marketplace, payment and advertising fees
Give each category its own account. Seeing referral fees, fulfilment fees, ad spend and processing fees separately tells you which channel and product lines are actually profitable.
7. Multi-currency and international sales
If you sell in several currencies, record foreign-exchange gains and losses and keep a consistent exchange-rate approach. Foreign-owned US companies should also make sure that owner transactions are recorded properly for annual filings such as Form 5472.
The monthly e-commerce routine
- Import or post settlement reports for every sales channel
- Reconcile payouts to the bank and card statements
- Update inventory and COGS
- Review sales tax collected and owed by state
- Check for uncategorised transactions and fees
- Produce a P&L by channel and review margins
For the full close process see our monthly bookkeeping checklist. We offer specialised support for online sellers through our bookkeeping services and industry expertise.
Frequently asked questions
How should e-commerce sellers record Amazon payouts?
Record gross sales, fees, refunds and advertising separately using settlement reports, rather than booking the net deposit as revenue.
Do I need to collect sales tax on Shopify sales?
Often yes, once you pass a state's economic nexus threshold. Marketplace sales are usually handled by the marketplace, but direct website sales generally are not.
What software works best for e-commerce bookkeeping?
QuickBooks Online and Xero both work well, usually paired with a sync tool that posts marketplace settlements accurately.
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