Bookkeeping for Online Sellers
While we’ve had the ability to search for transactions in the Income and Expense tabs for a while now, we just expanded that functionality to connected marketplaces like eBay, Amazon, Etsy, Shopify, etc. as well as bank and credit card accounts.
Just type in the value that you are looking for. You can also combine the search with other filters like date range.
In our continued efforts to make it easier to get data out of Seller Ledger, we just added the ability to export both the Profit and Loss report and the Schedule C tax report.
Just click the “Export” button in the upper right of the Filters section and Seller Ledger will generate a comma-separate (CSV) file containing the values. You will then be taken to the Exports page under Settings (which we announced a few months ago) where you can download the file you just requested:
As always, we look forward to more customer suggestions. Keep them coming by emailing us at [email protected].
To make it easier to see trends in your business profit or loss, as well as what’s driving it, we are excited to add a new chart to the top of your Profit and Loss report, above the traditional table:
Mouse over any color on the chart to see the amount for that category, for that period.
One fun feature – if you click a category name in the legend, it will toggle that category on and off, so you can choose to isolate certain categories.
Do you make a lot of the same business-related trips in your vehicle throughout the course of the year? Like going to the post office to ship packages? Do you go to the same venues to source on a regular basis? If so, manually recording each trip can become a bit burdensome when it comes to writing off your mileage. Well, no more. Seller Ledger now makes it simple to record many mileage trips at once.
If you use a spreadsheet to track your mileage trips so that you can copy and paste the same trip over an over, you can now upload a version of that to Seller Ledger and let us calculate the deductions for you.
Under the Expenses tab, you will now see a new sub-tab called “Mileage Upload.” Like we allow with bank accounts and inventory, you simply need to format a CSV file properly for mileage with the following columns:
Click the “Choose File” button to find the CSV file on your computer and then click “Save”. Seller Ledger will import the file and create mileage trips for each row in your file, as well as calculating the deduction based on the date and the IRS standard rate for that date.
Don’t miss our post on maximizing your mileage deductions.
New to Seller Ledger? Sign up for a free 30-day trial, no credit card required. We encourage you to play around with our software before committing.
Have more feature requests? Please keep them coming – let us know at [email protected].
Are you are an eCommerce seller who stores inventory in a closet, basement, office, attic, garage or other location in your home? You may be able to use the Home Office deduction for those spaces to reduce your tax burden. This article explains how to qualify for the Home Office Deduction and how it can be used for inventory storage in your home.
Disclaimer
Before proceeding, it’s important to mention that we at Seller Ledger are not tax experts and are not trying to provide tax advice. It is critical that you as a reader make your own decisions on how to handle your specific tax situation, which may include hiring a professional.
Generally, qualifying for the home office deduction requires that you meet two criteria:
If you run your eCommerce business from home and have no other place of business, you may qualify for that first criteria. In addition, you may ONLY use the the space you are claiming for your home office deduction for business, not for any other purposes. Here is a link to the IRS page describing the Home Office Deduction in more detail and we recommend you consult with a tax professional to see if you qualify.
Let’s talk about a couple inventory storage examples with the home office deduction to clarify.
If you use a spare room in your home for mixed purposes, such as storing your own out-of-season clothing or other personal items mixed in with the inventory for your business, you will forfeit your ability to claim the home office deduction for that space. If, however, there’s a portion of the room that is dedicated exclusively to inventory and that section is separate from the space used for personal items, the portion dedicated to inventory storage would be acceptable to claim.
The same is true of spaces for packing and shipping. If you use your dining room table for these purposes, and that is where you also eat all your meals, it would not qualify as a business-use-only space. However, if you pack and ship in a corner of an office that is never used for personal purposes, that space would qualify.
If you qualify for the home office deduction, there are two methods for calculating the amount to deduct. There is both a simplified method to calculate your deduction, which many people find to be easier to use, and a regular method.
The simplified method is quite simple. It allows you to measure the square footage dedicated to your business and then calculate $5 per square foot. But there is a limit of up to 300 square feet. This method applies to both a traditional home office space where you work for your business and spaces in your home you use for dedicated inventory storage for your business.
Let’s say you store inventory in one dedicated closet of the home as well as a portion of your basement. If the closet measures 30 square feet and the portion of the basement dedicated to inventory measures 120 square feet, that would be a total of 150 square feet. Let’s say you also have an 10×12 office that you use exclusively for your business to list items for sale, manage customer support, purchase inventory and package items for your business, so that would be another 120 square feet. (Remember, this office must be a dedicated space for your business, not a mixed-use space!). The closet, plus the portion of the basement, plus the office is 30 sf + 120 sf + 120 sf = 270 sf. This meets the test that it is not above the maximum allowed of 300 square feet. The total of 270 square feet is multiplied by $5 to be $1,350, so that would be the amount of your Home Office deduction on your taxes.
Now, some of our larger sellers may look at at that 300 square foot maximum and say, aw, isn’t that cute. But I have way more inventory than that. For folks in that situation, you might want to consider the “regular method.”
To use the Regular Method, you would divide your expenses of operating the home into those that are business-related and those that are personal. You may deduct any purely business expenses in full. For shared expenses, you may allocate the portion that are business-related as a percentage of the total, using the percentage of square footage in the home that is dedicated to the business.
For example, let’s say your home is 2000 square feet. If 350 square feet are dedicated to your business, you would use 17.5% as the percentage that is business-related. Deductible expenses for business use of home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs, etc. In this example, you could deduct 17.5% of each of these costs. Again, you should consult the IRS details and seek advice from a tax professional to get this exactly right. And you may use either the Regular method or the Simplified method, but not both.
Now let’s clarify some edge cases that might apply to you:
What if your inventory is stored in a separate detached structure on your property such as a garage, barn, shed or other out-building? So long as you meet both the Principal Place of Business and Exclusive and Regular Use criteria, all of these would qualify.
What if you live in an apartment or condo instead of a home? Or you rent your home instead of owning it? Or you live in a mobile home or on a boat? Again, if you meet both the Principal Place of Business and Exclusive and Regular Use criteria, these would all qualify as well.
Let’s say you’ve outgrown your home as a place to store inventory. You store the bulk of your inventory in a rented warehouse, but some inventory gets stored at home too. In this case, you may NOT meet the criteria necessary to use the home office deduction. Your home may no longer be the principal place for your business. According to the IRS, inventory storage is deductible “so long as your home is the SOLE fixed location of such trade or business”. Consult a tax professional for further advice on this situation.
If you’re already using Seller Ledger, entering a Home Office Deduction is very easy. Simply go to the Expenses tab and click the “Add Expense” button in the upper right. When prompted, enter a description like “Home Office Deduction” and the amount you’ve calculated. Seller Ledger will automatically know to categorize that expense and it will roll up on your real-time Schedule C form. You can always reach out to us at [email protected] with any questions.
If you’re not yet using Seller Ledger, feel free to give it a try. We offer a 30 day free trial to all customers, no credit card required. You can learn more at www.sellerledger.com. For tips on additional deductions that may apply to you, you can also see our blog post on 3 Hacks to Maximize Mileage Deductions.
In our ongoing efforts to streamline eCommerce accounting and bookkeeping, we’ve just rolled out the ability to invite an accounting professional to access your books in Seller Ledger.
If you work with an accountant, bookkeeper, enrolled agent, or anyone else who helps you with your accounting, it’s now quite simple to grant them access to your Seller Ledger account. Just go to newly redesigned Settings -> Business page and you’ll see a new option to invite an accounting pro:
Just click on that button, enter the email address of your accounting professional, and they will receive an invitation to link to your account. Clicking on that invitation will allow your accounting pro to create their own Seller Ledger account, with their own login details.
Once your accounting pro has accepted your invitation s/he will be able to view all of your financial data, categorize transactions and run reports. S/he won’t be able to do the following:
You certainly can, at any time.
Nope. Not only does it not cost you anything, but as of right now, accounting professionals can use Seller Ledger for free. Think of them as your first “extra” user on your Seller Ledger account.
As with all new features we roll out, we welcome any and all feedback to help us improve over time. Please encourage your accounting professional to also send us feedback at [email protected].
Depop sellers can now import their sale history directly into Seller Ledger, further automating their accounting and tax preparation.
Like with Whatnot and Mercari, who don’t yet offer public APIs, you can download a sales report from Depop and upload it to Seller Ledger. Just follow these steps:
Follow these steps from Depop to get a CSV file of your sales history.
When you click the “Add account” button under Connected Accounts on your Seller Ledger dashboard, you will now see a button for Depop.
After clicking the Depop button, enter a name for your new account and click “Create Account”
Once you’ve created your new Depop account, you’ll be taken directly into that new account, to a screen that allows you to upload your Depop sales file.
Choose the file you downloaded from Depop and click “Save.” Your file will be uploaded and your transaction history will be imported into Seller Ledger.
Trial users
If you are still in your trial period, Seller Ledger will only import the last 90 days of transaction history, regardless of how large your Depop file is.
Depop doesn’t provide payout information in their sales files, so we don not have a way to automatically match the to deposits at your bank. If you link your bank account to Seller Ledger, you’ll want to make sure that your payouts from Depop don’t get double-counted. So, when you see your Depop payouts hit your bank account, make sure to categorize them as “Transfer: My Depop Sales” – or whatever you named your Depop account.
Because we can’t pull in your new sales and expense information on a dailybasis, you’ll want to make sure to come back every once in a while to upload your latest sales history. How often you choose to do so is your choice. We show the date of the most recent imported transaction on the Seller Ledger dashboard to help remind you.
Lastly, if you make a mistake with any of your uploaded information, it’s not a problem. The “Import History” tab shows you all of the files you’ve uploaded over time, with the ability to simply delete one or more and try again.
We know there are other channels out there that provide CSV files of transaction history. If you would like to see other channels supported, please request a new platform or email us at [email protected] with your interest and, if you’d like to be particularly helpful, a sample of a transaction history file from that channel.
Cheers,
The Seller Ledger Team
One of the most interesting things that happens during tax season is that people tend to start paying much closer attention to their numbers than during the rest of the year. There are LOTS of cases where different sources provide different numbers.
But perhaps the most frustrating cases come when a single company reports different numbers in different places. We recently shared this example from Etsy. Even eBay, one of the oldest eCommerce marketplaces, is not immune.
In this article, we’re going to explain by eBay’s 1099-K doesn’t match the financial statements they provide to sellers.
If you pull down any statement from your eBay account (which eBay explains how to access here), at the top under the Transaction summary section, you’ll see a total for all orders and refunds for the period.
But, notice the language in parentheses. In both cases, they are adjusting for fees. If you scroll down in your statement, you come to the Orders section:
You’ll see the sale price of the item sold, in this case $19.99, and it’s shown as a positive number (and in green.) Below it, you will see the final value fees amount, in this case $2.67, and it’s shown as a negative number.
eBay then adds those two numbers together to get what they call a “Net Total” for this sale. That amount represents the change in your eBay seller account balance as a result of this order. In this case, eBay is going to add $17.32 to your account.
And if you scroll to the bottom of the Orders section, you’ll see a Total Orders amount that equals the sum of all of these Net Total amounts from all of your orders. And that Total Orders amount will match exactly the Orders total shown at the very top of the statement.
You will find the same thing to be true of the refunds.
This all makes sense…until you get to the form 1099-K.
According to eBay’s own guidance, the gross amount reported on your 1099-K…
“does not include any adjustments, for example, credits, discounts, fees, refunds, or any other adjustable amounts.”
That means your 1099-K is never going to match the totals in your financial statements.
But that’s ok. A good way to think about your monthly financial statements from eBay is the same way you would look at the statements you get from your bank. They simply explain everything that has caused a change in balance for that account. They do not give you perfect information for reporting and filing taxes. For example, your bank account will show all of your eBay payouts as deposits. But adding up those payouts up won’t match your 1099-K or give you enough information to file. There’s too much detail missing.
From that same article, eBay points customers to another part of the website to better verify 1099-k balances. They have created a “1099-K detailed report” that you can download.
As we’ve written before, the 1099-K is an “informational” document, but is not meant to be the definitive source of financial information for your tax return. It provides no information about refunds, fees, cost of goods sold or operating expenses. It is up to you, the seller, to make sure that you are filing an accurate tax return that ensures you are only paying tax on your profits.
While biased, we think bookkeeping software like Seller Ledger, that tracks all of your transactions at the detailed level, makes it much easier to see how all of these numbers add up.
“While reviewing our tax and sales information in the Etsy dashboard, I noticed a significant discrepancy between Etsy’s reported numbers and Seller Ledger’s figures regarding total sales and income.”
Thus began a recent email exchange with a customer. And because we take accuracy rather seriously here at Seller Ledger, we dug right in immediately. Fortunately, the customer attached a screenshot of what Etsy was showing (numbers hidden for privacy.)
For those want to follow along, you can find this same information by going to:
Etsy > Finances > Legal & Tax Info > Select Tax Year
In order to compare directly, I pulled up this customer’s account, went to the Profit and Loss report, set the year to 2024, selected view by month, and set the channel filter to “Etsy”. This allowed me to see just the Etsy income and expense by month for the year.
And do you know what? The customer was correct. Etsy was showing different totals that Seller Ledger was. The question became, why? Was Seller Ledger wrong?
It was time to find out.
I copied the top “Income” section of the Seller Ledger profit and loss report into a spreadsheet. I then added a new row for the numbers provided in that Etsy tax screen. Lastly, I calculated the difference between the Etsy number for each month and the Total Income amount.
That’s when I noticed an interesting pattern. The numbers matched precisely in 7 of the 12 months of the year. And in the months where they didn’t match, the difference was EXACTLY the same as the “Refund” amounts shown in Seller Ledger for that month.
So Seller Ledger got the numbers exactly right. But how could the numbers be different?
In short, what is happening is that Etsy’s totals are not being reduced by order refunds. And this is a common occurrence with 1099-Ks across payment platforms, as we’ve previously written about. In fact, you can browse Etsy’s help article on the subject, and find some interesting language:
“Gross sales” may include but are not limited to:
- All of your sales
- Shipping
- Refunds
- Card processing fees
- Sales tax applied using the sales tax tool
- Canceled orders
May include? That doesn’t sound very definitive. But perhaps the most confusing is language around “refunds being included”.
The customer shared that someone from Etsy customer support had stated that refunds were included in the totals. But does that mean they have been reduced by the amount of the refunds? Or are they saying that the original sales (that eventually get refunded) are included in the total, but not the actual refund? In this instance, it was the latter.
After a bit more research, we found that Etsy actually does spell this out in more detail – you just have to find the right support article:
Your gross sales is the total amount your buyers have paid you, for the entire year, without subtracting expenses, such as:
- Fees
- Refunds
- Shipping costs
In general, we have found that platforms, when reporting Gross Sales, include all of the original sales, whether they get refunded or not, and do not subtract out the refunds when they happen.
For me, there a few interesting learnings here:
I also want to give a shout out to the customer who worked with us on this case (you know who you are:), for being patient and sharing where they got the original source data so that we could share this experience and learning with others.
Tax time is here (in the United States, anyway) and for Shopify businesses in particular, that means a lot of potential complexity. And now that the 1099-K threshold is being lowered to $5,000 per platform, now is a great time to consider ways to simplify Shopify taxes
You can avoid a lot of hassle by investing some time in planning how to manage your business finances. And while tax preparation is one of the last things Shopify store owners tend to focus on (or enjoy,) each filing season can be a painful reminder of the choices we previously made.
It sounds obvious, but newer and smaller sellers often think they can put this off for the future. But spending the time (and money) to separate commingled personal and business finances is just not worth it. Make sure you have a dedicated business banking account, where all of your eCommerce payouts get deposited. Take out a dedicated business credit card (or use a debit card) and make sure all of your business expenses are paid through it. Doing so makes it a relative breeze to get your transaction history for tax time. You’ll have fewer places to look, fewer statements to track down, and most importantly, get to completely skip “removing” personal transactions.
When choosing a bank or credit card, do a little research into their online banking capabilities. While most banks have some level of online banking, some banks do a much better job making transaction history available electronically. In particular, small, regional banks and credit unions tend to invest less in their online banking capabilities. This can lead lead to less data being made available, and sometimes at lower quality.
Another way to evaluate online banking capabilities is by looking at how banks handle sign-in and authorization. The best banks now support OAuth, which permits 3rd party application developers to get customer “permission” to access specific data from their bank using special tokens, which avoid the need to request usernames and passwords. In addition, customers can choose to manage and “revoke” permission of these external programs from the bank’s website.
I mentioned in the prior tip the importance of online banking and access to electronic financial records. The same goes for eCommerce channels. Most large, established channels make their data available through APIs (application programming interfaces,) which allow other software companies to access that data. But not all access is the same.
Some accounting solutions take shortcuts, like only pulling payout information, which is pretty much what you get from banks anyway. But those payouts are missing key details, like item prices, shipping collected, sales tax collected and possibly remitted, and fees paid. Given that different platforms report different totals on 1099-Ks, you’ll want to make sure you have proper transaction details to give you an accurate financial picture.
Others completely ignore things like the actual products sold and that sale’s effect on inventory and cost of goods sold. For example, you may not want to choose a product whose Shopify review reads like this:
Actual accounting software review from a Shopify customer
“This does not pull in sales receipts with product info. So if you track inventory in [name removed to avoid embarrassment], it will not reduce your inventory when you sell an item”
Spend a little time up front, do your homework, read reviews and discussions in different online communities, and make sure your accounting software gets you the eCommerce details you need.
These days, most successful eCommerce merchants sell across multiple channels. And some platforms, like Shopify, allow you to connect other marketplaces to get a more complete view of your sales. For example, the Shopify Marketplace Connect app allows you to bring in data from Amazon, eBay, Etsy, Walmart and more. But this can lead to challenges in reporting, as the same data gets replicated across different platforms. You’ll want to ensure that you’re never double counting sales or expenses.
Unfortunately, this may lead you to think you can simply connect all of your other marketplaces to Shopify, then pull all of that information from a single source. While this may sound in theory, having worked directly with Shopify’s API, we know that the level of detail you get from the kind of direct integrations outlined in Tip #3 is lost when the data gets to Shopify.
Hopefully, accounting/bookkeeping software knows how to handle this, but you will want to keep an eye on the data.
This might be the single biggest thing you can do to avoid headaches at the end of the year (and for many years to come.) Investing the time to create a system of assigning unique SKUs (stock keeping units) for each item you sell will pay off immeasurably down the road. A lot of retailers and eCommerce sellers use a “smart code” approach, similar to what Shopify outlines in this handy tutorial. But whichever method you use, the most important thing is to choose something that is unique to each product/item.
You’ll also want to make sure to use these same SKUs across channels when listing items for sale. Doing so can enable the following (assuming your accounting/bookkeeping system is set up well):
In addition to simplifying end-of-year calculations of inventory value and cost of goods sold, this approach can also calculate the gross profit/margin on each sale, giving you better insight into what products drive the most profit for you.
While most online marketplaces (eBay, Amazon, Etsy, etc.) must now collect and remit sales tax on behalf of sellers, many online store platforms like Shopify, Woo Commerce and such still leave it up to the merchant to collect sales tax from the buyer and remit (a.k.a. “file”) to the individual states. For sellers in that category, I strongly recommend outsourcing to a paid service like Shopify Tax, TaxJar or another similar service.
Want to try it yourself? You can learn more in this article, but here’s a partial list of what that entails:
As the original head of product for TaxJar (though I left long ago,) I can assure you that trying to manually determine all of the above and comply properly, is incredibly complex and can become a monster drain on your productivity as a business owner. Of all the places to try to save money, this one might be the worst idea to do so:)
As you can tell from this article, there is a strong bias in favor of thinking through and structuring your approach to business finances up-front, in the hopes of automatic future workflows. For any business owner, it’s better to spend the bulk of your time where you add the most value, and minimize time spent on drudgery. For Shopify and other eCommerce merchants, that means getting back to sourcing, listing and fulfilling. Hopefully, some of these tips can help simplify Shopify taxes going forward, with the added bonus of informing you how to run your business more profitably.
If you are a US-based eCommerce merchant who files a Schedule-C with your tax return, you may wish to consider Seller Ledger, an accounting/bookkeeping platforms that does a lot of what’s described above (particularly tips 3 & 4.) We offer a 30-day free trial, no credit card required. We can even help pull in all of your 2024 transaction data. And we have plans to expand to other business types as well as internationally.
Oh, and all of our customer support is handled via email by the actual product team.
Try us today: https://sellerledger.com/shopify-accounting-software/
