Our ecommerce tax services go beyond simply preparing the business and owner’s annual tax returns. An ecommerce tax CPA needs to understand the accounting behind Amazon, Shopify and other selling platforms. Your ecommerce tax accountant also needs the experience to identify planning opportunities, understand how they affect taxable income and know how to properly report them. Good ecommerce tax preparation brings those two sides together.
Your accounting firm may understand Shopify, Amazon, A2X and QuickBooks Online. They may know how to reconcile payouts, account for marketplace fees and produce accurate monthly financial statements.
But how deep is their tax experience?
Tax planning is more than knowing the latest strategy. You need to understand when a strategy actually applies and what deductions or elections are available. You also need to know how it affects the business and its owners and, ultimately, how to put it on the tax return correctly.
At Schultz & Associates, our ecommerce accounting team works directly with experienced tax professionals who have spent decades working with privately held businesses. Our younger professionals understand today’s ecommerce platforms and technology. They also work side by side with senior tax professionals who have been implementing many of today’s popular tax strategies since long before anyone was talking about them on TikTok.
We aren’t interested in chasing every new tax idea that shows up online. Our ecommerce tax services focus on finding strategies that actually make sense for the business and making sure we implement them correctly.
[Visit our Ecommerce Team Page → ]
Knowing the Tax Strategy Is Only the Beginning
It’s one thing to know the strategy. It’s another to know whether it makes sense for your business and how to properly put it on a tax return.
Before we recommend a tax strategy, we want to know where you are trying to take the business. A company still in startup mode may need a very different tax approach from an owner planning to sell in two years. Both may need something completely different from an owner who expects to run the business for the next 20 years.
That matters because we aren’t just looking at this year’s tax bill. Entity structure, owner compensation, major purchases, retirement planning and the timing of certain deductions can all depend on what you are trying to accomplish.
Saving the most tax this year isn’t always the right answer. We want the tax strategy to fit the business you are building, not just the return we are preparing today.
Once we understand your goals, we can start looking at which tax strategies actually fit.
Then we have to implement them. That might mean a particular election, tax form, disclosure, calculation or supporting documentation. It may affect the business return, the owner’s individual return or both.
Knowing the tax trick isn’t enough. You also have to know how to present it to the IRS.
That’s where experience matters. Our goal isn’t to come up with the most creative tax strategy. It’s to find legitimate opportunities that fit your business and where you are trying to take it. Then we make sure we execute them correctly.
Ecommerce Tax Services Get More Complicated as Your Business Grows
As an ecommerce business grows, the tax questions tend to get more complicated. Some decisions involve rules that even experienced business owners may only deal with once or twice.
Our ecommerce tax services look at more than the current year’s return. Here are some of the areas we consider when looking at the bigger tax picture.
Cash Basis Accounting Doesn’t Always Mean You Can Deduct Inventory When You Buy It
This one causes plenty of confusion.
Qualifying small businesses have more flexibility in how they account for inventory under Section 471(c). But being a cash basis taxpayer does not automatically mean you can buy $500,000 of inventory in December and deduct the entire $500,000 simply because you paid for it.
Depending on the accounting method being used, the cost of merchandise may still need to be accounted for as the product is sold. In practice, that can mean maintaining an inventory-type account on the books. It can also mean making a tax adjustment to account for merchandise that has not yet been sold.
The terminology may have changed. The need to understand what you purchased, what you sold and what you still have has not.
Product Development Can Create Tax Decisions
Many ecommerce companies do more than purchase finished products and resell them. They design products, develop prototypes, test new materials, improve existing products or develop their own software.
Those activities can raise questions under the research expenditure and research credit rules. The answer isn’t simply that every new product qualifies for an R&D credit.
We first need to understand what the company is actually doing. Then we can determine which costs may qualify and how those costs should be treated on the tax return.
For an ecommerce company that continually develops new products, these rules can become much more significant as the business grows.
Your Entity Choice Can Affect an Eventual Sale
An S corporation can make sense for many profitable ecommerce businesses. That doesn’t mean it is automatically the right entity for every ecommerce company.
If you’re building a company with the intention of eventually selling it, the long-term tax consequences of the entity structure deserve consideration. In the right circumstances, Section 1202 and the Qualified Small Business Stock rules can make a C corporation worth evaluating.
This is another reason our ecommerce tax services start with understanding your goals. The right entity for someone building a company to sell may be very different from the right entity for someone who expects to own it for the next 20 years.
Planning for a Sale Should Start Before You Have a Buyer
Tax planning for the sale of an ecommerce business shouldn’t begin after the letter of intent arrives.
An asset sale and a stock sale can produce very different tax results. Inventory, equipment, goodwill, depreciation recapture, tax basis and rollover equity can all become part of the discussion.
You can address some decisions during negotiations. Others may require planning years before a sale.
If selling the company is part of your long-term plan, we want to know that well before a buyer shows up.
The QBI Deduction Gets More Complicated at Higher Income Levels
Section 199A can provide a significant deduction to owners of qualifying pass-through businesses. The calculation becomes more complicated as taxable income increases.
W-2 wages, qualified property, entity structure and owner compensation can all become relevant. For an S corporation owner, reasonable compensation can also affect the overall planning.
The goal isn’t simply to maximize one deduction. We need to look at how all of the pieces work together.
Ecommerce Tax Planning Should Fit the Business
There isn’t one tax strategy that works for every ecommerce company.
A startup investing heavily in growth has different priorities from a mature company generating significant cash for its owners. An entrepreneur building a brand for an eventual sale may need to make decisions today that won’t matter for several years.
That’s why our ecommerce tax services start with the business rather than a list of tax strategies.
We want to understand what you’re building, where you want to take it and what you expect the business to look like several years from now. Then we can build the tax planning around those goals.
The strategy matters. The implementation matters just as much.