Hey, eCommerce seller! Let’s talk about taxes. Not exactly the most thrilling topic, I know. But if you’re running an online business, the way you handle your taxes can make or break your profits.
Here’s the deal: A lot of eCommerce sellers overpay taxes, miss deductions, or even trigger IRS red flags without realizing it. And honestly? It’s not your fault. Taxes are complicated, and most accountants out there don’t fully understand the unique tax challenges eCommerce businesses face.
That’s where we come in. At Insogna CPA, one of the top CPA firms in Austin, Texas, we specialize in helping eCommerce sellers keep more of their hard-earned money and stay IRS-compliant. Let’s break down the 7 biggest tax mistakes online sellers make and how to avoid them.
1. Not Tracking Your Cost of Goods Sold (COGS) Properly
If you’re selling physical products, COGS (Cost of Goods Sold) is one of the biggest tax deductions you have. But if you’re not tracking it correctly, you could be:
- Overstating your profits (hello, higher taxes!)
- Underreporting profits (which the IRS doesn’t love)
COGS Includes:
✔ Product costs (wholesale, manufacturing, etc.)
✔ Packaging and shipping supplies
✔ Storage and fulfillment fees
Fix It: Use accounting software or work with an Austin tax accountant to track your COGS accurately so you’re not leaving money on the table.
2. Missing Home Office & Shipping Deductions
Running your business from home? You might be missing out on some major deductions like:
✔ Home office space (if exclusively used for business)
✔ Business-related internet and phone costs
✔ Shipping supplies (boxes, labels, bubble wrap—you name it)
Why This Hurts: Every dollar you don’t deduct = more taxes you don’t need to pay.
Fix It: Keep detailed records of these expenses and talk to a CPA in Austin, Texas who knows how to maximize deductions without raising IRS red flags.
3. Ignoring Multi-State Tax Nexus Rules
If you sell across state lines, you might owe sales tax in multiple states—even if your business is based in Texas.
→ Using Amazon FBA, Shopify, or Etsy? If they store your inventory in another state, guess what? You might have sales tax obligations there. Ignoring this can lead to penalties and compliance headaches.
Fix It: Work with a tax advisor in Austin to figure out where you have nexus and make sure you’re collecting and filing sales tax properly.
4. Using a Generic Accountant Who Doesn’t “Get” eCommerce
Newsflash: Not all accountants are created equal.
Most traditional accountants don’t specialize in eCommerce, which means they miss critical deductions, don’t optimize your inventory strategy, and leave you paying more taxes than necessary.
Fix It: Find a small business CPA in Austin (hey, that’s us) who actually understands eCommerce tax strategies and won’t treat your online store like a brick-and-mortar business.
5. Failing to Reconcile Your Merchant Accounts Properly
If you use Shopify, Amazon, PayPal, or Stripe, you might not realize that what hits your bank account isn’t always your actual revenue (thanks, transaction fees, refunds, and chargebacks).
If you don’t reconcile these accounts correctly, you could be reporting the wrong income leading to IRS audits, overpayments, or penalties.
Fix It: Work with an Austin accounting service that specializes in eCommerce bookkeeping so your records are accurate and tax-compliant.
6. Not Planning for Quarterly Estimated Taxes
As a self-employed business owner, you’re supposed to pay estimated taxes four times a year.
- If you don’t? Expect IRS penalties.
- If you wait until April? Get ready for a nasty tax bill.
Fix It: A CPA firm in Austin, Texas can calculate your estimated taxes and set you up with an easy system so you’re never caught off guard.
7. Mixing Personal & Business Expenses
Still swiping your personal card for business expenses? Stop. Right. Now.
- Mixing personal and business finances is a tax nightmare.
- It makes it harder to track deductions and easier for the IRS to question your records.
Fix It:
✔ Open a business bank account and credit card ASAP.
✔ Work with an Austin, TX accountant to clean up your books and separate expenses properly.
Let’s Make Sure You’re Not Overpaying the IRS
Running an eCommerce business is already challenging enough—your taxes shouldn’t be another headache. With the right strategy, you can keep more of your profits, avoid IRS headaches, and scale with confidence.
Think you might be making one of these mistakes? Let’s fix it before tax season hits! Schedule a tax strategy session with Insogna CPA, a trusted Austin small business accountant, and let’s save you thousands!