E-commerce Bookkeeping: Sales, Fees, and Refunds

Online sellers often have more transactions than any other small business, and most of them arrive as net payouts that hide the real numbers. Here's how to keep e-commerce books that match your marketplace reports and your 1099-Ks.

Record sales gross, not net

A Shopify, Amazon or Etsy payout is sales minus fees, refunds, advertising and reserves. If you record the payout as revenue, your sales are understated, your fees are invisible, and your books won't match the 1099-K the platform sends the IRS.

Instead, record each settlement period from the platform's report: gross sales, sales tax collected, shipping charged, then each fee and refund, so the net equals the deposit.

Use clearing accounts

Create a clearing account for each payment processor and marketplace. Sales go in; fees, refunds and payouts come out. When the clearing account is zero after each payout, you know every dollar is accounted for.

Separate your fees

Referral fees, fulfillment fees, payment processing, storage, advertising and subscription apps each belong in their own account. Together they're often your second-largest cost after inventory.

Handle refunds and chargebacks

Refunds reduce sales (and may return inventory to stock). Chargebacks reduce sales and add a fee. Record both rather than netting them away.

Track cost of goods sold

Inventory you buy is an asset until it sells. Record purchases (including freight and duties) to inventory, then recognize cost of goods sold as products sell, using your inventory app or periodic counts. Without it, profit swings with every purchase order.

Keep sales tax straight

Marketplaces collect and remit sales tax in most states as marketplace facilitators; your own website may not. Record tax collected as a liability, separately by channel, so you know what you owe and where. Selling into many states can create obligations; see our sales tax nexus service.

Reconcile to 1099-K

Each January, compare 1099-K amounts with gross sales recorded for each platform. Differences usually come from refunds, sales tax or timing, and they should be explainable before your return is filed.

Getting help

Our e-commerce bookkeeping service sets up clearing accounts, records settlements gross and tracks COGS. Growing stores typically fit the Growth package, from $560 a month.