Shopify bookkeeping: how to book payouts, fees, inventory and sales tax

The most common Shopify bookkeeping error is booking bank deposits as revenue. A Shopify Payments payout is a net amount. According to Shopify’s help center, before a payout reaches your bank:

• Processing fees are deducted from each transaction.
• Refunds come out of your next payout, and the original card fee is not returned.
• Chargebacks are taken right away, along with a chargeback fee.
• Reserves and adjustments can hold back or change part of a payout.

If you book deposits as sales, you understate revenue and miss deductible fees. Your 1099-K and your sales tax reports will not tie to your books.

A clearing account sits between Shopify and your bank. Each payout is booked as one entry:

• Credit gross sales and shipping income.
• Credit sales tax payable for tax collected.
• Debit refunds and discounts (contra revenue).
• Debit merchant fees and chargebacks.
• Debit the clearing account for the net payout, then clear it when the deposit hits the bank.

At month end the clearing account should equal payouts in transit. A balance that keeps growing points to a missed refund, fee or adjustment. Sync apps that post one summary entry per payout to QuickBooks Online or Xero follow this approach. Use a separate clearing account for each payment source, such as PayPal or Shop Pay Installments.

Inventory and cost of goods sold. Book inventory purchases, freight-in and duties as inventory, not expenses. Move cost to COGS as products sell, using Shopify’s cost per item or an inventory tool. Count or reconcile inventory at least at year end.

Sales tax is a liability. Tax you collect belongs to the state. Book it to sales tax payable and clear it when you pay. Selling into several states can create nexus. See e-commerce sales tax and multi-state nexus.

Form 1099-K. After the One Big Beautiful Bill, the IRS says the federal reporting threshold for third-party payment networks is again more than $20,000 and more than 200 transactions. Payment card transactions have no minimum, and some states set lower thresholds. Reconcile any 1099-K to your gross sales, and report all income whether or not you get a form. See online business taxes.

1. Book every payout for the month through the clearing account.
2. Tie gross sales, refunds and taxes to Shopify’s Finances reports.
3. Reconcile the clearing account and each bank and card account.
4. Record inventory purchases and update COGS.
5. Reconcile sales tax payable to your sales tax returns.
6. Book app subscriptions, ads and shipping labels to the right expense accounts.
7. Repeat for other channels such as Amazon or wholesale. See Amazon seller accounting.

Best for: direct-to-consumer brands selling on Shopify, often alongside Amazon or wholesale, that want books ready for tax returns, lenders and decisions.

1. Free initial consultation. Show us your Shopify setup, sales channels and current books.
2. Fees quoted upfront, in writing. Transparent, fair fees based on your volume and channels.
3. Cleanup if needed. We fix past payouts booked as sales and set up clearing accounts.
4. Monthly close. Payouts, inventory, sales tax and reconciliations each month.
5. Tax and planning. Your tax return and planning built on the same books.

Switching from another bookkeeper? See how to switch bookkeepers. For the full service, see e-commerce accounting.