A CPA for E-Commerce Sellers Who Actually Reads Your Settlement Reports

Very likely, yes. Since South Dakota v. Wayfair in 2018, every state with a sales tax imposes economic nexus based on your sales into that state rather than your physical presence. The most common threshold is 100,000 dollars of sales in the current or prior calendar year, though several states use a 500,000 dollar threshold and a number of states have dropped their separate transaction-count test entirely. Two details catch sellers off guard. First, states differ on whether sales made through a marketplace count toward your threshold even though the marketplace collects the tax. Second, thresholds are measured on gross sales in many states, including exempt and wholesale sales, so a business with little taxable revenue can still trigger a registration and filing obligation.

No. Marketplace facilitator laws make Amazon, Etsy, eBay and Walmart responsible for collecting and remitting tax on sales made through their platforms, which removes most of the liability for those specific transactions. It does not cover your own channels. Sales through your Shopify or WooCommerce store, wholesale orders and direct invoices are yours to collect and remit. Separately, inventory stored in a state can create physical nexus on its own, which matters for Amazon FBA sellers whose stock is redistributed across fulfillment centers without their involvement. Many states also still require a registered marketplace seller to file returns reporting the marketplace sales as exempt, so a zero-liability state can still carry a filing requirement and late-filing penalties.

The One Big Beautiful Bill Act restored the long-standing threshold for third-party settlement organizations such as PayPal and Venmo: more than 20,000 dollars in gross payments and more than 200 transactions. The 600 dollar rule enacted in 2021, which had been delayed repeatedly by IRS transition relief, was repealed rather than merely postponed. Two points matter more than the number. Payment card transactions, which is how most Shopify and Stripe volume is processed, have never had a de minimis threshold and are reported regardless of amount. And the threshold governs paperwork, not taxability: all business income is reportable whether or not a form is issued. The practical risk is that Form 1099-K reports gross settlement volume before fees, refunds and chargebacks, so it will not match your revenue unless your books reconcile the difference explicitly.

Most small online sellers have a choice. Internal Revenue Code Section 471(c) allows a business whose average annual gross receipts fall under the Section 448(c) threshold, which is inflation-indexed and sits around 31 million dollars, to avoid full inventory accounting. You may either treat inventory as non-incidental materials and supplies, deducting the cost when the item is sold or consumed, or conform your tax treatment to the method used in your books. What you cannot do is deduct stock when you pay for it while it sits in a warehouse. Even where the tax rule is permissive, we normally still keep accrual inventory internally, because without an accurate cost of goods sold figure you cannot see gross margin by SKU, and margin by SKU is the number that decides what you advertise, discount and discontinue.

Because a settlement deposit is a net figure. What lands in your bank account is gross sales minus platform and processing fees, refunds, chargebacks, shipping labels, advertising billed against the account, loan repayments and rolling reserves. Booking that deposit as revenue understates both your sales and your expenses by the same amount, which quietly destroys your gross margin, hides how much you are actually paying in platform fees, and produces a revenue figure that will not agree to the Form 1099-K the IRS receives. Correct e-commerce books post gross revenue, then each deduction to its own account, with the settlement statement reconciled to the bank deposit every period. It is the single most common structural error we find in seller books, and it is the one that turns into an IRS notice.