Sometimes you may find yourself with inventory that isn’t selling, so you think about donating it in the hopes of writing it off. The question is – can you write off inventory donations? And if so, how?
The good news and the bad news
The good news is: yes, you are permitted to donate unsold inventory. According to the IRS:
How much you can deduct
“the amount you can deduct is the smaller of its FMV on the day you contributed it or its basis”
FMV means “fair market value”, as in, what you could sell the item for. And basis is your full loaded cost for that item.
The bad news, at least for Schedule-C filers, is that you do not get to just write the donations off as part of cost of goods sold. From that same IRS publications:
How to classify donations
“You must remove the amount of your charitable contribution deduction from your opening inventory. It isn’t part of the cost of goods sold.”
What this is basically saying is that, instead of adding those donated items to your cost of goods sold total, you need to remove them from your inventory, then deduct the value of those items on Schedule A of your personal tax return.
Handling Inventory Donations in Seller Ledger
Fortunately, Seller Ledger allows you to remove donated items from inventory. When you click the “Remove stock”, simply choose the “Remove for personal use” option.
This remove those items from your inventory without adding them to cost of goods sold. Instead, they will be treated as a “Not for business” expense.
While we pride ourselves on providing the most automated accounting solution for eCommerce sellers, there will always be circumstances where a seller conducts business in person, or on a platform what doesn’t offer much in the way of connectivity.
For those cases, we’ve rolled out improved order history tracking for off-site and cash sales.
Step 1: Create an account to track those off-site or cash sales
We just rolled out the ability to create/add a new type of asset account that you can use to track these sales. From your dashboard, click the “Add Channels, Banks and Accounts” button and, if you scroll to the bottom of the next screen, you’ll see the following option:
This can be a “Cash” account, or an account to track sales from other online marketplaces like Facebook Marketplace, TCGplayer, StockX and more. Just name your account and you’re off to the races.
Step 2: Add your order details
Click into your newly created account from your Dashboard, and you’ll see a new button called “Add order” in the upper right:
Clicking on that button will bring up a much more detailed transactions screen that not only lets you enter the regular information like date, customer, and amount, but will also let you record the item(s) that you sold:
If you scroll down, you will also see that we allow you to enter additional information about each order, including:
Any shipping you may have collected from the buyer
Any sales tax you may have collected (or had collected for you)
Any fees that may have been incurred (for example, by a non-connected marketplace that this order sold through
Any shipping labels or other shipping costs you had to pay
If a part of this order was donated to charity
As a reminder, the more details you can record that are tied to an order, the better able Seller Ledger is to tell you the EXACT net profit you make on every sale.
And as a reminder, you can always us the regular “Add transaction” button to record things like payouts (remember – they are transfers,) non-order fees, etc.
Want more step-by-step guidance?
If you’re having trouble figuring out how to enter data from certain non-connected marketplaces, just email us a copy of one or more of their reports (or screens) to [email protected] and we’d be happy to help.
Give it a try
Whether it’s cash-sales or other non-connected platforms, you can now get a complete view of your eCommerce business finances. Seller Ledger offers everyone a 30-day free trial, with no credit card required. Sign up and see for yourself how easy it is to get your finances in order.
Recently, we wrote about how folks who source on eBay can track their purchases in Seller Ledger. Well, we’ve also heard that more and more resellers are sourcing from Whatnot, a fast-growing live-streaming sales platform. We already make it possible to import your Whatnot sales into Seller Ledger, but today, we’ll show you how to create inventory from your purchase history.
Step 1: Get your Whatnot purchase history in the right format
First, you’re going to want to download your Whatnot orders report for a given period of time. It will come in a CSV file format that, then you open it in a spreadsheet, will look something like this:
The goods news is, because it’s already in a CSV file format, you only need to make a few changes and it will upload to Seller Ledger just fine.
Step 2: Remove and rename columns
The vast majority of the columns in this file won’t be needed for uploading inventory. You can simply delete the following columns, which are not supported by our inventory upload feature
order id
order numeric id
buyer
seller
product description
product category
processed date
order status
order style
order currency
sold price
subtotal
shipping price
taxes
taxes currency
credits applied
Inbound cost of goods sold
Note: because the “total amount” column amount includes the inbound “shipping price” and “taxes” amounts, that “total amount” will be properly divided among the quantity of the items and be included in the item costs.
Keep the “product name” column header as is, as well as the header for “quantity.” But rename “total amount” column header to “total cost” to match the column headers we require.
Step 3: Create unique SKUs for each product
The most important step now is to add a new column, titled “sku” and to create unique SKUs for each item in this file. Then, when you list them on various platforms to sell (and include the corresponding SKU value,) Seller Ledger can tie the sale back to the original cost, reduce your inventory and properly calculate cost of goods sold.
Step 4: Upload your inventory to Seller Ledger
Lastly, to load this cost information into Seller Ledger, just go to the Inventory tab and click the “Add Inventory” button. Record the date that you are uploading this information, “Whatnot” as “Purchased from” and enter the total amount of all of the items (which you can add up in the spreadsheet.) Then click the button near the bottom of the screen that says “Upload inventory”, choose the file, and click save. Within a few minutes, it should show as a single large purchase of items with all of the cost details broken down.
That’s it. Happy sourcing on Whatnot. May your profit be ever increasing.
In an effort to help sellers avoid stock outs, we just released a new version of the Inventory -> Stock page.
We’ve added a couple of new features to help avoid stocks by making it easier to track out-of-stock inventory. They will also help with re-ordering and inventory analysis.
For one, you can now filter by stock levels, including items that are out of stock, and those that are at a low stock level (below 10 units.)
Plus, you can now sort your inventory by any of the columns.
We’ve been getting more and more requests from our resellers asking for ways to better automate inventory management, in this case then they source from eBay. It is possible to track eBay inventory purchases as Inventory, but it takes a little bit of adjusting. Here are the key steps:
Step 1: Get your eBay purchase history in the right format
First of all, you’ll need to request your purchase history from eBay, which should get you a list that looks like this:
Next, you will need to copy and paste the table information from this page into a spreadsheet and save it as a CSV formatted file. Fortunately, because the data is laid out in a table format, copying and pasting should work quite well. Having your data in this format will allow you to easily upload the details to Seller Ledger.
Also, make sure to to delete any items that were purchased for personal use.
Note: because the total cost column amount includes the Transaction Shipping Fee amount, that amount will be properly divided among the quantity of the items and be included in the item costs.
Rename the Listing Title column to “product name” and the Total Price column to “total cost” to match the column headers we require.
Step 3: Create unique SKUs for each product
The most important step now is to add a new column, titled “sku” and to create unique SKUs for each item in this file. Then, when you list them on eBay, record them in the Custom label (SKU) field. That will ensure that we can tie the sale back to the item cost.
Step 4: Upload your inventory to Seller Ledger
Lastly, to load this cost information into Seller Ledger, just go to the Inventory tab and click the “Add Inventory” button. Record the date that you are uploading this information, “eBay” as “Purchased from” and enter the total amount of all of the items (which you can add up in the spreadsheet.) Then click the button near the bottom of the screen that says “Upload inventory”, choose the file, and click save. Within a few minutes, it should show as a single large purchase of items with all of the cost details broken down.
That’s it! Hopefully that saves a bunch of time for those of you sourcing inventory from eBay.
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. Yo 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 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.
