E-commerce bookkeeping goes wrong in a predictable place: the owner treats the money that lands in the bank as sales. On a platform like Shopify, that single deposit is actually dozens of orders, minus processing fees, minus refunds, minus chargebacks, minus sales tax the platform may have already remitted — sometimes spanning two different months. Get the recording right and every month closes cleanly. Get it wrong and revenue is overstated, margins are fiction, and the sales-tax account never reconciles.
This is general information, not individual tax advice — the right treatment depends on your specific situation.
This guide focuses on Shopify and multi-channel direct-to-consumer sellers. If you sell primarily through Amazon, our Amazon Seller's Complete Guide to Bookkeeping covers the FBA-specific mechanics.
Your Payout Is Not Your Revenue
Gross sales are what customers paid. The payout is what survives after the payment processor's cut, refunds issued in the period, chargebacks, and any tax the platform withheld to remit on your behalf. Posting the payout straight to a sales account collapses all of that into one number and hides the timing gap between when a sale happens and when the cash arrives. Record the gross, then each deduction as its own line.
Record Gross Sales, Then Every Deduction
A clean monthly entry books gross product revenue and shipping income at the top, then separate expense lines for merchant fees, refunds and returns, and chargebacks, then the sales-tax liability, and finally ties out to the net cash deposited. Done this way, your profit-and-loss shows the true top line and the real cost of selling, and your balance sheet carries the correct sales-tax payable.
The Marketplace-Facilitator Wrinkle
In many states, the marketplace itself is now required to collect and remit sales tax on transactions it facilitates, and platforms have been expanding which of their channels this applies to. When that happens, your sales report shows the full sale including tax, but your deposit is lower because the platform kept the tax and will pay the state directly. Your books need an adjustment so you are not also recording — and paying — that same tax liability. Know exactly which of your sales channels remit for you and which leave the obligation with you.
Sales-Tax Nexus Across Every Channel
Selling online creates sales-tax obligations in states where you have economic nexus — typically once sales into that state cross a dollar or transaction threshold — even with no physical presence there. Marketplace-facilitated sales may or may not count toward those thresholds depending on the state. Track your sales by state from the start; our article on sales-tax nexus walks through how the thresholds work.
Inventory and Cost of Goods Sold
Inventory is an asset until it sells; only then does its cost hit the profit-and-loss as cost of goods sold. Buying $8,000 of stock is not an $8,000 expense that month. Use landed cost — product plus freight-in plus duties — so margins are real, and count physical inventory at least quarterly to catch shrinkage and breakage.
Reconcile Every Payout, Every Month
Match each platform payout to the orders, fees, and refunds that composed it, and confirm the ending sales-tax liability agrees with what the platform reports. This is tedious by hand past a few dozen orders a month, which is why most growing stores use a connector that posts summarized journal entries into the accounting system. The test of a good setup: you can explain every bank deposit to the dollar.
How VarStan Helps
We set up e-commerce books that separate gross sales, fees, refunds, and tax the right way, reconcile platform payouts monthly, and keep a running picture of where you have sales-tax exposure. If your revenue number has never quite matched your deposits, we can get it clean and keep it that way.