Do you sometimes give away some of your inventory for promotional purposes? Or do you sometimes have to return inventory to a vendor? If so, how to you handle the accounting for that?
To date, Seller Ledger has treated manually removed inventory as shrinkage. But no longer. Today, we add support for additional reasons.
Let’s take the example of giving away inventory items for promotional purposes. When you go into your Inventory ->In Stock view, click the “Remove stock” button:
You will then be presented with an updated form. Click on the new “Type” field to choose a reason for this inventory removal. Notice that “Shrinkage” is still an option, but you also now have the flexibility to choose a different expense option.
When you choose “Custom Expense”, in addition to asking for the specific product that you are removing from inventory, we also ask for an expense category. In this case, because we’re using the inventory item as a promotional giveaway, we’ve chosen “Advertising” as the category.
What’s happening behind the scenes?
Normally, when you sell an item, or if it breaks (e.g. “shrinkage,) when you reduce your inventory account by the cost of that item, you also add that amount to “Cost of Goods Sold.” However, when you give away an item in your inventory for marketing/promotional purposes, you are still reducing the amount in your inventory, but now you are choosing an operating expense like “Advertising” or another similar category of your choosing.
The reason this might matter to you is the impact it has on gross profit and gross margin calculations. If you were to include giveaway items in your gross profit calculations, you might draw the conclusion that your are earning less on each individual sale than you actually are.
If you’re an eBay, Etsy or Amazon seller, you’ve likely breathed a sigh of relief over the last few years thanks to Marketplace Facilitator laws. These rules require platforms like eBay and others to calculate, collect, and remit sales tax on your behalf in most states. It made sales tax compliance for small sellers exponentially easier.
But there’s still an important issue to consider: while the marketplace may be collecting and remitting the tax for you, it often doesn’t absolve you of your own sales tax liability and registration requirements.
In the world of e-commerce tax, there’s a crucial difference between the act of collecting the tax and the legal act of establishing nexus. Understanding this distinction is vital for avoiding unexpected tax notices.
Economic Nexus: What is it and what does it mean for you?
Economic nexus establishes a link between your business and a state based purely on your sales volume or transaction count, regardless of whether you have a physical presence (like a warehouse or office) there.
The typical thresholds are:
$100,000 in gross sales into the state annually, OR
200 separate transactions into the state annually (though many states are dropping the transaction count requirement).
If you meet either threshold in a state, you are generally required to register for a sales tax permit there. The common seller misconception is: If eBay is collecting the tax, my sales shouldn’t count toward my personal nexus threshold.
Unfortunately, a large number of states disagree.
State-by-State Guide: Does My Marketplace Revenue Count Toward Nexus?
The most critical distinction for any remote seller using Amazon, eBay, Etsy, or other major marketplaces is whether or not the revenue from those sales counts toward the state’s economic nexus threshold (e.g., $100,000 in sales).
The good news is that the majority of states exclude facilitated marketplace sales from the calculation, as the marketplace facilitator is already responsible for collecting and remitting the tax. However, a significant number of states still require you to include all sales (both direct and marketplace) in your nexus calculation.
Group 1: Marketplace Sales are EXCLUDED from Seller’s Nexus Threshold
In these states, every dollar you sell through a platform like eBay, Etsy, or Amazon counts toward your $100,000 (or $500,000) threshold. For example, if you sell $100,000 worth of goods on eBay into California, you have established economic nexus in California. You must register with the state.
In these states, sales made through a registered marketplace facilitator (like Amazon, Walmart, etc.) DO NOT COUNT toward your individual economic nexus threshold. You only need to track your direct sales (e.g., sales from your own website) to determine if you have nexus.
Alabama
Arizona
Arkansas
Colorado
Florida
Georgia
Illinois
Indiana
Louisiana
Maine
Massachusetts
Mississippi
New Mexico
North Dakota
Oklahoma
Pennsylvania
Tennessee
Utah
Virginia
Wyoming
Group 2: ALL Sales are INCLUDED in Seller’s Nexus Threshold
In these states, you must include all sales you make into the state (both direct-to-consumer sales AND sales made via a marketplace facilitator) to determine if you meet the economic nexus threshold. If your total gross sales (marketplace + direct) meet the threshold, you must register for a sales tax permit.
Alaska (Local)
California
Connecticut
District of Columbia
Hawaii
Idaho
Iowa
Kansas
Kentucky
Maryland
Michigan
Minnesota
Missouri
Nebraska
Nevada
New Jersey
New York
North Carolina
Ohio
Rhode Island
South Carolina
South Dakota
Texas
Vermont
Washington
West Virginia
Wisconsin
Once you hit nexus, you are legally obligated to register with that state’s taxing authority. Even though the marketplace handles the tax remittance for those platform sales, you will still be required to file a sales tax return (often a “zero return” or a return where you report marketplace sales as exempt/deductible sales) to stay compliant. If you also make direct sales (e.g., through your own Shopify store), you must begin collecting and remitting tax on those direct sales immediately.
What should Marketplace sellers do?
As an e-commerce seller, especially one growing rapidly across platforms, you must maintain a single, comprehensive view of all your sales data.
Track Gross Sales: Use tools like Seller Ledger to aggregate every sale—eBay, Amazon, Etsy, and your own website—by state. This gross total is what you’ll use to check against most states’ economic nexus thresholds.
Monitor Your Direct Sales: Keep a separate tally of your sales that are not processed by a marketplace facilitator. This number is essential for compliance in states that exclude marketplace sales from the calculation.
Register When Necessary: If your total gross sales trigger nexus in a state like California, you must register, even if you don’t collect any tax yourself due to the Marketplace Facilitator law. Failure to register when nexus is met is a non-compliance issue that can lead to penalties down the road.
Don’t let the simplicity of Marketplace Facilitator laws blind you to your own economic nexus obligations. The sales tax burden might be gone, but the compliance burden remains.
One of the first things new customers do when linking online marketplaces to Seller Ledger is to compare the numbers in our program to what they see on their marketplace. This can be especially challenging with platforms like eBay, because they provide different totals depending on where you look in their website. Want a great example? Check out this deep dive guide on how eBay reports their 1099-K totals and how it compares to other totals in various places on eBay.
Fortunately, we’ve taken the extra time and effort to make this even easier. Now, as soon as your eBay account gets connected, you can click into it to see a summary report like this:
We have modeled this page after the Performance report in eBay’s Seller Hub. You can change the date range, see you recent sales and selling costs within that date range, and see your payout history. You can even click into each payout to see every transaction that makes up that payout, as we recently announced.We will be rolling out similar pages tailored to each of our other channels in the future, so please let us know if you have any suggestions for improvements at [email protected].
In an effort to provide more transparency into where all of your eBay numbers come from, Seller Ledger is excited to roll out improved drill-downs for eBay payouts.
When you click into your eBay account in Seller Ledger and review your transactions, you have likely seen your payouts listed with an “>>expand” link next to them:
Previously, we didn’t include too much information when you clicked expand. However, now, when you click expand, you’ll see some important additional information. Not only do we show the bank account details that the transfer was made to, but we show the summary totals by category.
Even better, we now provide a button to be able to drill down and see EXACTLY which transactions make up that payout.
And as a reminder, if you link Seller Ledger to the bank account where those payouts get deposited, we will automatically match the payouts from your eBay account to the deposit in that bank account. This means you can look at any eBay payout deposit and drill all the way back down to see the transactions that are included.
We’ve since added this same functionality for Amazon payouts. We will work on providing similar functionality for payouts from other marketplaces in the future, so stay tuned!
It is with no small sense of excitement that we are announcing the initial rollout of a long-awaited feature: the ability to view your NET profit per order. What is net profit per order? It’s how much money you make after all order-level costs have been factored in, including inventory cost, fees and shipping. Many customers think of it as their “ROI” or return on investment for each item they sell.
This has been a goal going back to the original days of Outright, which became GoDaddy Bookkeeping, which was eventually shut down – all without ever having delivered on one of the most powerful features available in eCommerce: the ability to answer the question – how much money did I actually make on that sale?
But what about the other costs associated with an order, like fees and shipping costs?
That’s where our new update comes in. With many platforms, we receive enough information about order-related fees to automatically link those additional expenses.
eBay profit per order
To start, we have rolled this functionality out for eBay sellers. In addition to Final Value fees, we can now also get your shipping label expenses and any Ad fees for that order. Assuming you have also recorded your inventory costs and use the Custom label (SKU) field when listing, Seller Ledger can now give you the following:
Just click into your eBay account, and, next to any order, click “>>expand” to see this new breakdown.
What if I buy shipping elsewhere?
Fear not, we also have the ability for you to link purchases of shipping labels/postage from other sources (e.g. Shipstation, Pirate Ship, USPS, FedEx, wherever.) In those case, you’ll see a line that looks like this:
Click that button to choose from an existing purchase from one of your connected bank/credit card accounts, or to manually enter the shipping cost:
A few caveats
As with any software solution, we can only provide information that is as good as the data we receive. If you don’t track your inventory costs at the item level, we cannot, of course, tell you your net profit.
In addition, for sellers on other marketplaces/platforms, you may notice pieces of this functionality when you click on >>expand in those accounts, but not as complete. Fear not, it’s on our list to expand to other direct connections such as Amazon, Shopify, Etsy and Walmart.
Help us continue to journey
We have made great strides in providing you the information you need to see how much money you are making on each eCommerce sale. But as you can see, there’s still more work to do. We will continue to automate more matching of information that is currently available. But to achieve more automation, we could use your help.
For those marketplaces that don’t provide public APIs of their financial data (Poshmark, Mercari, Whatnot, Depop,) we invite you to email them and make that request. If enough people do so, perhaps they will prioritize such an effort. And if they do, rest assured, Seller Ledger will be here to add that next level of automation and insight.
Are you using a less automated way to manage your eCommerce finances?
Whether it’s manual spreadsheets or other accounting platforms that don’t provide enough detail, it’s never too late to improve your back office processes. We let our product speak for itself, which is why we offer everyone a 30-day free trial, with no credit card required. Sign up and connect multiple platforms in minutes.
If you’re an eCommerce seller, are self-employed or have income not subject to regular tax withholding (like investment earnings), you likely need to pay estimated taxes to the US federal government throughout the year. These payments are often called “quarterly,” but if you look at the due dates, you’ll notice they don’t neatly align with three-month calendar quarters. So, what’s the deal?
Why the “Quarterly” Deadlines are a bit strange
The US tax system works on a “pay-as-you-go” principle. This means you’re supposed to pay taxes on your income as you earn it, rather than waiting until the end of the year to pay one big lump sum. Estimated tax payments help people meet this rule.
Here are the typical due dates for a calendar-year taxpayer:
Payment 1 (January 1 – March 31 income): April 15
Payment 2 (April 1 – May 31 income): June 15
Payment 3 (June 1 – August 31 income): September 15
Payment 4 (September 1 – December 31 income): January 15 of the next year
As you can see, the second payment period is only two months long, while the others are three or four months. This unevenness is the main reason why they aren’t true calendar quarters. And it explains why you will see different amounts in different screens within Seller Ledger.
Important Note
If a due date falls on a weekend or a legal holiday, the deadline is typically pushed to the next business day.
When Did It Change and Why?
Estimated taxes used to be paid based on strict calendar quarters, with payments typically due on the 15th of April, July, October, and January. The change to the current, somewhat quirky schedule happened back in the 1960s, specifically with the Tax Adjustment Act of 1966.
The main reason for this shift was to help the federal government’s budget. The federal fiscal year begins on October 1st. By moving the third payment due date from October 15th to September 15th, the government was able to collect a significant chunk of tax revenue before the start of its new fiscal year. This provided a quicker influx of cash.
This change left an extra month that needed to be accounted for in the payment schedule. Since the April 15th deadline for the first payment (and the annual tax filing deadline) was already well-established, and the January 15th deadline for the final payment covered the end of the calendar year, those dates largely stayed put. The logical place to absorb the shifted month was the second payment period, moving its due date from July 15th to June 15th. This is why the second “quarter” covers only April and May.
Essentially, the due dates were adjusted to align with the federal government’s fiscal year planning and cash flow needs, creating the slightly uneven “quarterly” schedule we have today.
Some good news for small eCommerce sellers! Congress, in the new One Big Beautiful Act, has restored the original 1099-K reporting threshold to $20,000 and 200 transactions in a year.
If you’re an eCommerce business seller, it was always necessary to file a tax return to report your profits, regardless of what 1099-Ks you received. However, lowering the reporting threshold to $600 was starting to catch a LOT of individuals simply selling their personal items, which was a big unintended consequence of the original idea.
Based on a recent question from a customer, we decided to outline the steps to make sure you automate the ability to track cost of goods sold with Poshmark.
The first step is to create a unique SKU (short for “stock keeping unit”) for each item you list. Next, record the SKU and purchase price (and any other inbounds costs) of that item in Seller Ledger. Finally, when listing your item for sale on Poshmark, make sure to include the unique SKU value in the listing. Doing this is not obvious, as the field is considered “optional” and not exposed by default.
Adding SKU value to your Poshmark listing
When you go to create a new listing at Poshmark, you will see a screen that begins like the following:
Scroll down to the bottom and you’ll see a private section called “Additional Details.”
In order to add a SKU to your listing, you’ll need to open the “Additional details” section by clicking “show details” on the far right. That expands the section to reveal a field for SKU:
Note – there is also a “Cost Price” field in there, but it’s not necessary (nor recommended) to record your costs there, as Seller Ledger should already have the cost information for that item in its records.
That’s it?
Yes, that’s it. What happens form here is that, when your item sells on Poshmark and Seller Ledger imports that sales information into our software, we look for the SKU value and automatically match it to what we show in your Seller Ledger inventory. Once we do that, we reduce the amount of your and automatically update your cost of goods sold expense amount. There is no additional record keeping or analysis that you need to do.
As part of our recent rollout of expanded support for balance sheet accounts, we’ve also made it possible to hide old connected accounts from the dashboard.
For those users who may have switched bank accounts, or had new credit cards issued, you likely want to keep all of the transaction history in those accounts (deleting the account would delete all of the transactions as well,) but may no longer wish to see them listed on your dashboard. Changing that is now simple.
Just go to Settings -> Accounts, where you will see the list of all of your balance sheet accounts.
Click the edit/pencil to the far right of the account you’d like to hide and you will see a checkbox to “Show on dashboard.”
Simply uncheck that box and click the Save button. That’s it. Your account, and all of it’s underlying transactions, will remain in Seller Ledger, but you won’t see it listed on your dashboard any more.
While it is important for Seller Ledger to remain simple to use, we have just rolled out some more powerful accounting features that were previously under the hood. Please note, they are all in open Beta, so please send us any feedback you have at [email protected].
Balance sheet accounts
From the beginning, Seller Ledger let you categorize your income and expenses, including the ability to add sub-categories. Now, we have provided the same functionality for balance sheet account, which you can find under Settings, in the new “Accounts” Tab,
As you will see, any connected accounts that you have will already show up there, as well as internal accounts we created behind the scenes, like Sales Tax Due and Owners Equity.
There are a number of possible accounts you might want to add, but here are some of the more common ones we have heard:
Cash accounts for tracking cash you withdraw and spend
Sales channel accounts that we do not yet support directly
Equipment tracking accounts, for depreciable assets like computers
Liability accounts for tracking outstanding loans
Balance sheet report
In addition to exposing and letting you customize your balance sheet, we’ve also just rolled out a new Balance Sheet report, which you can find in a new sub-tab under the Reports tab.
Journal entries
And finally, the ultimate accounting utility, the journal entry, has been introduced. This feature lets you create any accounting transaction across multiple accounts/categories.
It is also the first place you will see the use of the dreaded accounting terms “debit” and “credit.” But, we assume those who intend to use this feature are familiar enough with accounting to understand these terms.
Now, remember, with great power comes great responsibility. Journal entries allow you to change your account balances in many different ways. But it is also easy to mess up your books. If you are not familiar with the use of journal entries, we recommend learning more before using this feature too much.
One caveat: we do not yet let you make journal entries that affect directly connected sales channels, as we try to keep the raw data from those channels as accurate as possible.
