ebay Archives - Seller Ledger

Navigating 1099-Ks for small sellers

Seller Ledger on November 7, 2023

As of the writing of this article, it appears likely that the lowered 1099-K threshold of $600 in gross payment amount will go into effect for tax year 2023. This is causing much anxiety among small sellers, and with good reason.

To help illustrate how much confusion and complexity is about to be created for small online sellers, we did research to identify some pretty common scenarios sellers might encounter that make for very interesting 1099-Ks and tax returns.

For example:

Inconsistent Gross Amount calculations

1099-Ks have been around since 2011. But did you know that, after 12 years, different platforms are still using different calculations in terms of what gets included in the Box 1 amount? See several examples as we look at the treatment of sales tax.

Selling personal items among your business inventory

Do you track your personal sales separately from your business sales? Because eBay, Poshmark and others don’t. You get a single 1099-K for all sales on each platform. Yet what if you sold some personal items at a loss? Personal items don’t get treated the same as normal business sales. We took a deep dive into this scenario, to help walk sellers through what to do.

Consignment sales

As a reseller of someone else’s items, you may be collecting the full amount of the sale, which will be reported on your 1099-K. Except your income is really only the commission you receive from the sale. How are you supposed to account for this? Learn more as we share what we’ve uncovered.

Disclaimer

The content in this page should not be construed as legal or tax advice. Please consult an attorney or tax professional regarding your specific tax situation.

Don’t stress

Our intent in pulling these example together is not to increase fear or anxiety. We believe there is ample evidence that the entire situation is imperfect, and what the IRS cares the most about is that you pay the correct amount of tax that your business owes. With reasonable bookkeeping, it shouldn’t be too hard to handle these scenarios. At Seller Ledger, we pull in your detailed sales and expense information to make this as simple as possible. We also offer a 30-day free trial, no credit card required.

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Make yourself heard

It is our belief that Congress does not fully understand the unnecessary complexity they have created, especially for small sellers. So, we encourage sellers to get involved and send a message to Congress. Click either of the buttons below to be taken to a place to make your voice heard:

eBay Mainstreet

1099K Fairness

If you find more interesting 1099-K scenarios that you’d like to see explored, shoot us an email at support@sellerledger.com and we’ll do out best to get to the bottom of it.

1099-Ks are inconsistent – but that’s ok

Seller Ledger on November 6, 2023

Back when we first launched, we wrote a blog post about 1099-Ks and where sellers can expect to find the amounts that make up the total in Box 1a (Gross amount of payment card/third-party network transactions.) At the time, we were referencing eBay’s calculations.

But, as we approach the end of the tax year, we’ve learned that different platforms calculate their Box 1a amounts differently, often around whether or not sales tax collected is included.

Below is a sample of our findings – if you discover more and want to pass them along, we’re happy to update the list.

Sales tax NOT included in Box 1a

For example, the following platforms indicate in their documentation that sales tax is likely NOT included in the gross amount reported to the IRS:

Ebay

In their help page, eBay states: “Additionally, Form 1099-K does not include the sales tax when it is automatically collected and remitted by eBay.”

Poshmark

This support page from Poshmark states: “Your Form 1099-K will only include income as calculated by gross sales (including fees, refunds, and cancelled orders) on the Poshmark platform.”

Etsy

Their help page is a bit less clear, stating that the gross sales includes “Sales tax collected by you.” However, just below that, they make this statement: “In some cases, Etsy collects sales tax from buyers and remits it to tax authorities on behalf of sellers. If Etsy has collected tax on your behalf, these amounts won’t appear on your 1099-K form.”

Sales tax included in Box1a

However, other platforms either don’t spell it out very clearly or imply the opposite – that sales tax collected IS included in the Box 1a amount:

Amazon

There does not appear to be an easy-to-find, definitive answer, but this thread on their discussion board indicates that sales is included.

Mercari

This page from their help center states that their Unadjusted Gross Payment combines various amounts, including: “Sales tax charged to buyer (a separately stated sales tax paid by the Buyer at the time of purchase and remitted directly to the state under Mercari’s sales tax registration)”

Square, Shopify and likely most shopping cart platforms

A quick search finds this discussion from the Shopify community stating that their 1099K had sales tax included. And another from Square users bringing up the exact same point

Disclaimer

The content in this page should not be construed as legal or tax advice. Please consult an attorney or tax professional regarding your specific tax situation.

Creating confusion

The IRS’s own instructions for Schedule C provides a great starting point for confusion. Looking at the instructions for Line 23 (expenses for taxes and licenses,) you will find the following two statements:

You can deduct the following taxes and licenses on this line.

State and local sales taxes imposed on you as the seller of goods or services. If you collected this tax from the buyer, you must also include the amount collected in gross receipts or sales on line 1.

and

Do not deduct the following.

State and local sales taxes imposed on the buyer that you were required to collect and pay over to state or local governments. These taxes are not included in gross receipts or sales nor are they a deductible expense. However, if the state or local government allowed you to retain any part of the sales tax you collected, you must include that amount as income on line 6.

Clear as mud, right?

Adding to the confusion, there are statements from some “experts” that it’s critical to have your tax return line up with the forms that the IRS receives. But if you are a multi-channel seller, and the IRS receives multiple 1099-Ks that are based on different calculations, how are you supposed to get your amounts to line up?

It is unlikely that members of Congress understood the full potential for inconsistency when they introduced Form 1099-K for the 2011 tax year. Yet it has remained relatively unchanged for the last 12 years. And now, with the threshold for “gross amount” dropping to $600, this confusion will impact more small sellers than ever.

It doesn’t have to be a big deal

From our perspective, what’s most important is that you get to the correct amount of tax owed. That’s where good bookkeeping comes into play. If you are a multi-channel seller facing the possibility of receiving multiple 1099-Ks that included different numbers (like sales tax,) it becomes critical to have the order-level details (product price, any discounts, shipping, sales tax collected, fees charged, etc) broken out and properly categorized so that you can sub-total by any or all of them. This way, should anyone come asking, you can produce accurate reports of every total, and even drill down to the specific transactions behind them.

With Seller Ledger, we automatically import order-level details from the top online sales channels, along with banks and credit cards, to help you produce a Schedule C tax report that is accurate for your business. Anyone can try Seller Ledger free for 30-days, no credit card required.

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Tracking cost of goods sold with eBay

Seller Ledger on June 29, 2023

eBay cost of goods sold tracking has been a challenge for years (as we have heard from both customers and members of the eBay management team.)

Not too long ago, Seller Ledger rolled out inventory tracking, complete with some nifty automated cost of goods sold calculations. But for eBay sellers, that functionality depends on the use of an optional listing field called “Custom label (SKU).” And it turns out, that field is not shown by default when creating listing templates. So, we thought we’d help folks learn how to find and use that field, and what magic it can potentially unlock.

When you start to create a listing, one of the first things you’ll do is create a title for your item. By default, you will see two fields: Item title and Subtitle. However, if you click on the link to the upper right, called “See title options“, you will see a few more options pop up. One of those options is “Custom label (SKU)”.

Click on the selector to turn that field on, and you should see an updated form that looks like this:

Now, you have the ability to enter information about this item in the Custom label (SKU) field. But what should you put there, and why is it important?

You can choose to put anything you’d like in there, but, if you follow this guidance in conjunction with Seller Ledger, you will see two major benefits:

Have your inventory reduced and your cost of goods sold automatically calculated when an item sells
See how much money you make on each sale

The key concept here is to have a unique identifier (SKU) for each item you sell on eBay. How you create that identifier is up to you. Some people put a combination of letters and numbers, with some parts relating to the product name, or the bin number in which they are are currently stored. Others simply choose ever-increasing numbers. What matters most is that each SKU value is unique to that eBay item.

In Seller Ledger, when you purchase items for resale, you now have the ability to create a product/item, complete with a Product SKU field.

If you enter the same value in your eBay listing under “Custom label (SKU)” that you enter in Selller Ledger under “Product SKU”, you can sit back and watch the magic happen. When one of those items sells on eBay, Seller Ledger will match the order to your inventory, reduce the number of “in stock” units in inventory, and automatically calculate the cost of goods sold for that item, and show you the gross profit for that sale, as seen below.

Feel free to dig in for a more in-depth look at how Seller Ledger helps automate inventory and cost of goods tracking.

Interested in giving this a try? Seller Ledger offers a 30-day free trial, no credit card required.

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Categorize eBay transactions the way you want… plus more

Seller Ledger on April 5, 2023

Now that we have officially launched, it is time to get back to making the product better and easier to use. To do that, we’ve focused on a number of enhancements that came directly from our customers.

Customize how eBay transactions are categorized

First up, we heard from a number of people that they would like to be able to change how eBay data gets categorized when it comes in. As a refresher, here is how Seller Ledger handles eBay transactions by default.

But, we’ve heard some great reasons to change the default settings. Some examples include:

Putting eBay fees under the “Advertising” category rather than “Commissions and fees.”
Putting Shipping costs under “Cost of Goods Sold” instead of “Office Expense.” There’s an interesting debate here, which we plan to tackle in a future blog post.

However, one of the coolest ideas was to let customers have eBay order amounts go under a subcategory of Product Sales, so that, if you are a multi-channel seller, you could have a profit and loss that starts with something like this:

Categorize eBay transactions — Custom eBay sales categories

To make this possible, just go to our new “Customize” page under the Settings tab, and edit the transaction types you’d like to change:

Remember, if you want to use any sub-categories for eBay data, you’ll want to create those sub-categories first.

See your profit or loss by month, quarter or year

This one is pretty self explanatory:

On a related note, we also added totals to top right of the Income and Expense tabs, so when you drill down or filter for a specific date range and/or category, you can see the totals. This will also match the numbers your click from the profit and loss report.

Ability to delete sub-categories

A small enhancement, but for those of you who add a sub-category but then decide you don’t need it, or made a mistake, you can easily delete them. Of course, if you have categorized any transactions using that sub-category, you will need to re-categorize them. We won’t give you the option to delete a sub-category if there are any transactions using it.

That’s it for now. We’ve got a few other improvements coming soon, so stay tuned.

It’s Official: We’ve launched

Seller Ledger on March 31, 2023

Launch day! Seller Ledger has officially exited its “Beta” period and now offers automated bookkeeping software that’s specifically designed for online sellers.

First, a “thank you” to our Beta customers

There is no way we could have pulled this off without the help of more than 300 online sellers who took the time to bang on our software to find the bugs, the data discrepancies, and the things that just weren’t easy enough to use. Your commitment to helping, your patience with the flaws, and your continuous communication made this possible.

What does it mean to “launch?”

No, we’re not throwing some big event (though we can’t rule that out for future milestones:) Launching simply means we are at the point where we’re asking folks to pay to continue using Seller Ledger. It also means we’re committing to supporting the product going forward. We still have big plans for improving the product. In addition to adding new marketplaces like Etsy, Amazon and others, we will also continue to prioritize smaller improvements to make the product easier to use.

Do I have to pay now?

While we’d certainly appreciate it, we are giving all of our Beta customers the same 30-day trial period they would receive if they just signed up today. But they have the benefit of keeping all of the data already in their account (including transactions for the full 2022 year where available.)

Beta customers can see their paid plan options here: https://app.sellerledger.com/settings/billing

What does this mean for brand new users?

If you’re new to Seller Ledger, you can sign up for a free 30-day trial, import up to 90 days worth of sales and expense history from eBay, PayPal, banks and credit cards, and see for yourself how well the product eases your bookkeeping burden. We don’t ask for a credit card or any form of payment up-front. At the end of your trial, decide for yourself whether we’re providing enough value to pay for continued use. If the answer is no, that’s ok. We’ll just do our best to earn your business in the future.

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Thanks again to all of our Beta and future customers. Stay tuned for more improvements!

The Seller Ledger Team

Bookkeeping for Multiple eBay accounts

Seller Ledger on February 14, 2023

Seller Ledger now supports bookkeeping for sellers with multiple eBay accounts.

Based once again on feedback from our wonderful Beta customers, we have added the ability to link multiple eBay accounts to Seller Ledger. This is especially important if you are looking to match the 1099-K that eBay sends. If you have multiple eBay accounts under a single Tax ID, eBay combines the totals for all accounts under that Tax ID.

Learn more about 1099-Ks and why bookkeeping helps you avoid unwanted discrepancies.

Connect multiple eBay accounts in Seller Ledger

If you have multiple individual eBay accounts, it’s simple to link them with Seller Ledger.

Just add each account, one at a time, and watch them show up on your dashboard.

You can see each account, the net sales amount, and how many transactions have been imported. Click through to view the transactions within each account.

To make tax time much easier, we roll up your sales and expenses across all of your eBay accounts into a single Schedule C tax report.

Automated bookkeeping for eBay sellers just got a lot easier for sellers with multiple accounts.

As always, keep the feedback coming. We’ll see you at the next feature announcement.