It’s tax season, hooray! Ok, no one except accountants (maybe?) are excited about tax season, but as business owners, we all have to deal with it. As a multi-channel seller, this is a huge challenge and probably my least favorite part of my business. First of all, disclaimer, I am not a pro at this, please consult with your CPA. This is simply an outline of what I’m currently doing and planning to do before meeting with my accountant this year.
As an eBay seller, my main concern is to charge taxes for my own state. My “Nexus” or home base state of operations is Florida, so I am registered to pay sales tax here and do so each quarter. My eBay listings are set to charge buyers from Florida the appropriate tax amount, this varies depending on your county, mine is 7.5% for example while others may be 6%.
Now, as an Amazon seller, there is much discussion about having to pay taxes in other states where you are considered to have “Nexus”. Mainly this applies to us FBA sellers because we have items stored in warehouses across different states. I have yet to do this myself, it’s a lot of paperwork and I really only have a small amount of inventory in FBA right now, but I do plan on setting it up. Here are instructions on finding out where you have Nexus for your FBA items, using TaxJar’s help.
What I Use for Accounting and Taxes for my eBay and Amazon Businesses:
GoDaddy Bookkeeping (previously known as OutRight)
Currently $49 per year for eBay store owners, I like it because it allows me to connect my eBay, PayPal, Amazon seller accounts and bank accounts. This is its biggest advantage, allowing you to have all your financial information in one place. It’s relatively user friendly, however, I have had issues where it wasn’t pulling all the information from Amazon and that caused some discrepancies in data last year. I got it fixed and this year the information is much more accurate. Take the time to go through your transactions, you can easily edit them, so that all your business expenses are included, you want as many deductions as possible come tax time. These include advertising costs, business subscriptions (including apps), equipment, office supplies, mileage, meals, and more.
You can see Sales by State (this is how I determine how much sales tax I owe each quarter), and pull other reports. Including an End of Year report, located under the Taxes tab, which is great for handing to your accountant.
If you do not want to use GoDaddy accounting, or do not have it setup fully yet, there are ways to get your information manually.
PayPal provides you with monthly and yearly reports you can use too. These show how many payments you’ve received, your PayPal fees and more. It does not show your eBay fees though. To access your PayPal reports, login to your account and go to Reports. The Annual Financial Summary can be downloaded and printed to hand to your CPA. Remember, if you made over $20,000 in sales, PayPal will also send you a 1099 form.
eBay also has reports but unfortunately, not as easy to pull yet. They do however include both your eBay and PayPal fees, so make sure this is clear to your accountant, you don’t want to submit the same information twice. If you already have access to Seller Hub and are an eBay Store subscriber, you would access this from the Seller Tools box within Seller Hub and click on Sales Reports Plus.
This will then take you to your Sales Reports page. Which will look like this, plus graphs and other figures I cropped out for privacy reasons:
To get your reports from the last year, click on Archived reports, you can then download and print reports for each month. When I’ve opened these, the reports include up to 3 months, so in reality you only need to download maybe 4 reports instead of 12, just take note of the dates covered. I recommend opening these in Excel or Numbers for Mac users, which makes them easier to read and understand for you and your tax professional.
Stephen Smotherman from FullTimeFBA.com has an excellent, detailed, step-by-step blog article on how to run the reports for Amazon. He covers how to get your inventory report and an Account Activity report showing all your sales and fees. It’s what I refer to when the end of the year comes along and I can’t remember how to get to the specific summaries and reports I want.
I keep a file labeled Taxes Year XXXX, and save all these files there, plus print them out so I can hand them to my accountant.
Goals: Set up and use TaxJar! It allows you to collect sales tax info from all your sales channels, having the data in easy to use format without having to manually pull reports from all of them. It can also AutoFile your sales tax for you (for $19.99 each time), to allow it to be truly automated. Worth it, in my opinion, particularly when you have to submit to more than one state. Note, you still have to file your normal business taxes, TaxJar is only for sales taxes.
We’re also going to be using Inventory Labs which allows us to enter the cost of our items purchased for Amazon, so that should provide us with more accurate information come tax time.
Phew, wasn’t that fun?! Head spinning yet? Got questions? We covered this in depth on Blab. You can watch the replay below.