Running an e-commerce business in the United States involves more than just making sales. Proper accounting and regulatory compliance are essential to avoid penalties, manage cash flow, and build a scalable business. Whether you sell on Amazon, Shopify, TikTok Shop, Etsy, or your own website, understanding your financial and legal obligations is critical.
1. Importance of Accounting for E-commerce Sellers
Accurate accounting helps e-commerce sellers:
- Track real profits and losses
- Manage operating expenses and platform fees
- Prepare tax filings accurately
- Monitor cash flow and inventory
- Support business growth and funding
Poor accounting often leads to tax issues, incorrect pricing decisions, and compliance risks.
2. Key Accounting Components for E-commerce Businesses
a. Revenue Tracking
E-commerce sellers must track:
- Gross sales
- Discounts and promotions
- Refunds and returns
- Marketplace payouts
Sales should be recorded before platform fees, while fees are treated as expenses.
b. Expense Management
Common e-commerce expenses include:
- Marketplace and payment processing fees
- Advertising and marketing costs
- Shipping and fulfillment
- Software subscriptions
- Inventory and packaging
- Professional services (CPA, legal)
Proper categorization ensures accurate financial reporting and tax deductions.
c. Inventory Accounting
Inventory must be tracked carefully to determine Cost of Goods Sold (COGS). This includes:
- Product purchase costs
- Import duties and freight
- Storage and fulfillment fees
US sellers commonly use FIFO (First-In, First-Out) for inventory valuation.
3. Sales Tax Compliance in the US
Marketplace Facilitator Rules
Most major marketplaces (Amazon, TikTok Shop, Etsy) collect and remit sales tax on behalf of sellers. However, sellers must still:
- Track sales tax collected
- Understand state-specific registration rules
- File zero-dollar returns if required
Economic Nexus
Sellers may be required to register for sales tax if they exceed state thresholds (commonly $100,000 in sales or 200 transactions).
4. Income Tax Obligations
All e-commerce sellers must report income on federal and applicable state tax returns.
Common Business Structures:
- Sole Proprietorship
- Single-Member LLC
- Partnership
- S-Corporation
- C-Corporation
Each structure has different tax implications, reporting requirements, and compliance obligations.
5. Business Registration & Legal Compliance
US e-commerce sellers should:
- Register the business entity properly
- Obtain an EIN if required
- Open a separate business bank account
- Comply with state and local business regulations
- Follow consumer protection and e-commerce laws
6. Record-Keeping Requirements
Sellers should maintain records for at least 3–7 years, including:
- Sales and payout reports
- Expense receipts
- Inventory records
- Tax filings and correspondence
- Bank and credit card statements
Good records protect sellers during audits and simplify tax preparation.
7. Using Accounting Software and Professional Support
To stay compliant, many sellers use:
- Cloud-based accounting software
- Inventory and sales integrations
- Automated reconciliation tools
- Professional CPAs or tax advisors
Professional support is especially important for multi-state sales or high-volume sellers.
8. Common Compliance Mistakes to Avoid
❌ Mixing personal and business finances
❌ Treating sales tax as income
❌ Missing tax filing deadlines
❌ Not tracking inventory properly
❌ Ignoring nexus thresholds
Avoiding these mistakes can save money and prevent penalties.
Conclusion
Accounting and compliance are foundational to the success of any US e-commerce business. While online platforms simplify selling, financial responsibility still lies with the seller. By maintaining accurate accounting records, understanding tax obligations, and staying compliant with regulations, e-commerce sellers can grow confidently and sustainably.