Selling online means selling into many states at once, through platforms that report your sales to the IRS. The questions are where you must collect sales tax, whether your books agree with what the platforms report, and how inventory is costed.
The points where tax and accounting rules come into play are numbered.
Numbered points are explained below.
At: Import and receive
How inventory is costed changes the profit you pay tax on. Businesses under the small business gross receipts test have simpler inventory options; larger resellers must capitalize certain costs into inventory under Section 263A.
We check which rules apply to you and record cost of goods sold in the books every month.
At: Sell online or in store
The IRS receives a figure for your sales that is often not your actual revenue. Payment processors, payment apps and online marketplaces report gross payments on Form 1099-K, before refunds and fees, and income is reportable whether or not you receive the form.
We reconcile the forms to your books so the return reports actual income and can explain the difference.
At: Collect sales tax
Selling online can create a duty to collect sales tax in states where you have no presence at all. Since the Supreme Court’s 2018 Wayfair decision, a state can require a remote seller to collect sales tax without a physical presence there; each state sets its own threshold, and marketplace sales may be collected by the platform in some states.
We review your sales by state against those rules.
Platform payouts split into sales, fees, refunds and sales tax, and matched to the bank.
Foreign sellers opening a US company for a US marketplace start with the entity, EIN and state registrations.
Foreign-owned US sellers usually have Form 5472 and related filings.
Inventory method and 1099-K reconciliation are settled before the return is filed.
The form shows gross payments, before refunds, fees and other adjustments. We reconcile it to your books so the return reports actual income and can explain the difference.
Not necessarily. It depends on each state’s rules, your sales into that state and whether a marketplace collects for you. We review your sales by state.