Record gross sales, not payouts
Each marketplace provides reports showing orders, item prices, taxes, fees and payouts. Use the gross item sales as your income. Record fees, shipping labels, ad charges and refunds as separate expenses or contra-income lines. The payout then becomes the cash side of the entry.
A monthly summary entry per marketplace is enough for most sellers. Detailed order data stays in the platform report that you save.
Use clearing accounts
Create a clearing account for each marketplace. Sales increase it, fees and refunds reduce it, and payouts to your bank reduce it further. At month end, the balance should match the amount the platform shows as pending. If it does not, something is missing.
This also handles timing. Orders made in December but paid out in January belong to December sales.
Sales tax handled by the marketplace
Many states require marketplaces to collect and remit sales tax on sales through them. The reports show the tax collected, which should not be your income or your liability if the marketplace remits it. Keep the reports to show that. If you also sell elsewhere, you may still have your own duties, so check each state's rules.
Do not mix marketplace tax in with your own sales tax payable.
Track inventory and cost of goods
Keep purchase invoices for items you resell, or materials for items you make, and track what is on hand at year end. Shipping supplies and packaging are expenses. Returned items that are back in stock have to be added back. A simple spreadsheet with purchase date, cost, quantity and quantity sold can work to start.
Cost of goods sold usually needs inventory counts to be accurate, so schedule one near year end.
Reconcile to the 1099-K and the platform
Platforms may send a Form 1099-K reporting gross payments, which can exceed your actual income because it includes fees and refunds that were later deducted. Compare it to your sales report and keep a reconciliation. See our guide on reconciling Form 1099-K for the method.
Also watch for personal items sold at a loss. These are not business sales, and your preparer can advise on them.
Download reports regularly
Platforms limit how far back you can download. Save monthly reports as PDF and CSV in your records folder. When you leave a platform, download everything beforehand.
On the first or second of the month, download the platform's monthly summary and payout report. Enter one summary journal entry: gross sales, fees, shipping labels, ad costs, refunds and the net payout. Compare the clearing account to the platform's pending balance. Save both reports in the month's folder.
If you sell on three platforms, repeat for each one with its own clearing account. It takes about fifteen minutes per platform once the template exists.
Common questions
Do I treat each order as a separate sale in my books?
Not necessarily. Monthly summaries by platform are common, with the detailed reports saved.
Where do payout holds go?
They stay in the clearing account until released.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.