February 27, 2023

How to Deduct Business Expenses on eBay

Keeping everything organized when your storefront is on eBay can be difficult. Read on to learn what you need to know to get the most out of this tax season.
How to Deduct Business Expenses on eBay
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How to Deduct Business Expenses on eBay

Whether you realize it or not, conducting business on e-commerce sites like eBay is, in many ways, like conducting business in a brick-and-mortar store. You will still have expenses like product and shipping costs, operating expenses, marketing, and so on just to keep everything running smoothly. However, many people might not realize that these expenses can also be deducted as business expenses. It doesn’t matter that your business is online; if you’re a small business selling products online through platforms like eBay, that still counts.

If you’re an eBay seller and are concerned about money and potential business expenses with your online business, you’re not alone. Keeping a thorough eBay seller accounting record is a great way to stay on top of business expenses and help track your business’s profitability.

Keep Good and Thorough Records

It doesn’t matter if you’re just getting started with your eBay business or have been doing it for years - there’s never a wrong time to start keeping thorough records for your eBay seller accounting purposes later on. Keeping good records means keeping everything you believe might be necessary to document for business expenses, business profits, sales, bank statements, and anything else that might be relevant.

Having these records on hand means you’ll better understand how much money is going into the business, how much is coming out of it, and how high or low your expenses truly are. Plus, you’ll be easily able to reference your records if you need to look back and check the numbers for a specific month, a certain product, or even a particular seller.

Filing system

Classify Your Expenses Correctly

When it comes time for tax season, you’ll be grateful that you categorize your expenses. Easy organization methods like these can help you avoid making an eBay accounting mistake.

Typically, when talking about categorizing expenses, your expenses will fall into one of two categories: direct expenses and indirect expenses. Direct expenses are the purchases you need to make, and they directly affect the sale of your product. For example, a direct expense might be the shipping cost, packing supplies, postal label, etc. These expenses may change from one order to the next, depending on what is ordered.

Indirect expenses, conversely, are costs that are not related directly to the sale of an item. These costs will contain the usual operating costs like paying for the platform, any payment processing software, production costs, and other expenses that are not directly related to selling the product but are essential to keep your business running.

Categorizing these expenses makes it easier in the future to determine your taxes and what can be deducted from those expenses. You might be surprised when you speak to your tax professional about the deductions you qualify for.

Use Accounting Software

Accounting software will make your life much easier if you’re an eBay seller. Trying to keep up with every receipt, invoice, purchase, or every other situation money comes in and out of your business can be a nightmare. With accounting software, however, you can easily go in and log any expenses or profits, categorize them, upload pictures or files, and more.

While it is not the same as going to a tax professional, you can use accounting software to keep everything organized and in one place. Software with integration services like Link My Books makes it easier for you to input all of your eBay accounting information. Link My Books can automatically input all of the sales tax information, and other fees into your accounting software, saving you time.

When you use eBay, tax laws are confusing, so having everything in one place will make it easier for everyone involved.

Business Woman

Speak With an Accounting Professional

An accounting professional will always be on top of the latest laws and regulations regarding taxes, which is especially important if your main selling platform is eBay. Tax time is stressful for almost everyone, but as long as you have everything logged and organized, speaking with an accounting professional will make things easier.

Because it is their job to know everything there is to know about taxes, you can feel confident that they can get you all of the information you need, including what you’ll need to submit to get deductions. They might ask you for items or invoices that you may have never considered as a business expense before, which is why keeping everything related to your business is so important. Any kind of deductions you can get can only help your business!

Organization is Key

The more organized you are, the easier it will be to get all of your accounting in order. As an eBay seller, you likely have stacks and stacks of order fulfillment paperwork, invoices, receipts, and more, and keeping everything organized is a logistical nightmare. However, coming up with a method right from the start will help save you a lot of time and heartache later on when tax season rolls around.

If most of your documentation is electronic, don’t place everything into one big folder. Name your items accordingly, and place them into different subcategories for easier location. If you’re able, scan any paper documents into the computer and place them into these categories as well. That way, you don’t have massive stacks of paperwork taking up so much space!

Not everyone can maintain everything electronically, though. Even if you can’t upload everything online, you should still endeavor to keep everything as organized as possible. Categorize different papers by type or month, whatever works best for you, and stick with that organization system. Once you stop, it’s overwhelming to start back up again. Stay on top of it, and you won’t regret it.

organization system

Link My Books

Here at Link My Books, we understand how confusing it can be to keep track of expenses on platforms like eBay. Accounting doesn’t come naturally to everyone. If you aren’t an experienced tax professional, then you likely aren’t running the numbers you need to understand every day or staying on top of the nuances that new tax laws might introduce into your business model.

With Link My Books, you won’t need to worry about all of the fine print. Our software makes it easier than ever before to help you keep track of all of your business expenses, with the integration of our software right into the eBay platform.

With only a 15-minute setup time, you’ll be amazed at what our software can help you accomplish in such a short time. It’s the perfect way to bridge the gap from inexperienced to experienced in a short period of time.

If you’re interested in checking out our fully integrated software, get started with us for free today!

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