Tax Tip Thursday

Ecommerce is becoming a much bigger part of small businesses, with some businesses focussed completely on ecommerce businesses.

If you have an ecommerce component to your business, you really need to ensure your bookkeeping is getting done correctly right from the start.

We have had a number of clients come to us a year or more into it and it is a significant project to get the bookkeeping completed.

Here are some of the key areas you need to be aware of:

1. Sales Tracking & Revenue Recognition

• Implication: You must record all sales accurately—including product sales, shipping charges, discounts, and returns.
• Tools: Most platforms provide downloadable reports (e.g. Shopify’s “Payouts” and “Orders” reports) which should be reconciled with your bank deposits
• This is one of the most important aspects of recording your transactions, but can also be the most difficult, trying to reconcile your deposits to your sales. Different companies have different strategies, from depositing daily, every “few” days, weekly or even monthly

2. Payment Processor Fees

• Implication: Platforms like PayPal, Stripe, or Shopify Payments charge transaction fees. These are business expenses that must be recorded.
• Tip: Deduct fees separately from gross revenue to avoid understating your income.
• One of the key problems with the payment processing fees is each company does it differently, some net the fees, some charge separately by transaction, some by day, some once a month.

3. Sales Tax (GST/HST/PST/QST)

• Implication: You may need to collect and remit GST/HST (or PST/QST depending on your province and customers’ locations).
• Considerations:
o Register for a GST/HST number with the CRA if you exceed $30,000 in annual revenue.
o Platforms may or may not collect tax on your behalf. It’s your responsibility to ensure compliance.
o You need to track how much tax was collected and to which province it applies.
• This is a huge issue! To start with, you need to know if you have to register in each province, then you need to figure out how to calculate the payable and/or how to track your collected provincial taxes.

4. Shipping & Fulfillment Costs

• Implication: Shipping costs (either absorbed by you or charged to the customer) are a business expense, and they can affect pricing and margins.
• Tip: Track third-party logistics (3PL) or Canada Post/UPS/FedEx charges separately.
• Shipping costs both purchase and sales, absolutely require invoices for the provincial taxes and GST. You can literally receive an invoice with the whole thing being taxes!

5. Inventory Tracking

• Implication: Inventory is an asset, not an immediate expense. The cost of goods sold (COGS) must be matched with revenue.
• Bookkeeping Needs:
o Initial purchases = inventory asset
o When sold = move from inventory to COGS
• Tip: Use inventory software or eCommerce integrations with accounting systems for real-time tracking.

6. Platform-Specific Reports

• Implication: Each platform has different data structures. You need to standardize and categorize info (sales, returns, fees) into your bookkeeping system.
• Tip: Automate where possible using apps like A2X, Synder, or direct integration to your accounting software.

7. Bank & Payment Reconciliation

• Implication: Deposits received in your bank may be net of fees and may not match individual sales.
• You must reconcile:
o What your platform says you earned
o What was actually deposited
o The fees that were deducted

8. Foreign Sales & Currency Conversion

• Implication: If you sell to customers outside Canada, you need to handle foreign exchange differences and possibly international tax rules.
• Tip: Record transactions in CAD and track exchange gains/losses if using USD or other currencies.

Please be aware if you running ecommerce – there are soooooooooooooo many pitfalls for the inexperienced!

Bookkeeping for E-commerce is not cut and dry. Come speak to us about our e-commerce bookkeeping packages!  Make An Appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.