Accounting Articles > E-commerce and Internet Retailers:

Accounting for an e-commerce based business

This concept baffles most traditional accountants and CPAs. It also baffles most clients, believe it or not. The clients think that because it’s on the internet it should be easier. The opposite is actually true.

This concept baffles most traditional accountants and CPA's. It also baffles most clients. The clients think that because its on the internet it should be easier. The opposite is actually true.

Why, one might inquire? The reasons are as follow:

1. Credit cards, Pay Pal accounts, or whatever are used rather than cash or check. There is always a fee, hence a deductible expense and more accounting work.
2. Delivery. They're not walking into a store and walking out with something, if we are talking about a tangible product. There is always a fee, and sometimes additional income. Hence additional accounting work.
3. Selling costs. Your generally going to sell these items from someone else's site. They always charge a fee. Where there's a fee there's additional accounting work and a deduction.
4. Sales Tax. This has become a nightmare. If you are, let's say an Illinois Retailer, and you are delivering a tangible product to an address inside the State of Illinois that is the end retail point, you are required to collect and remit Illinois Sales Tax. If you don't collect sales tax, you better have a copy of the customer's wholesale certificate.
5. Use Tax. If you are physically located inside the state of Illinois, and purchase something for use in the business form outside of the State of Illinois, you should probably not pay Illinois Sales tax on the item. But you are required to pay Illinois Use tax.

If you are asking this question in the first place then it is probably time for a change in accountants. Documentation and accounting for an e-commerce or internet business can be much more difficult than handling a traditional accounting client. The biggest mistake that you can make is trying to do your own accounting. Just because you have a copy of Quickbooks, and are computer savvy doesn't mean that you know anything about taxation. Please don't confuse the ability to reconcile a checkbook, with the ability to complete an income tax return that would survive an audit.

As highly recommended CPA's and EA's in the Chicagoland Area providing financial accounting and taxation services, we have been successfully handling cases like your for many years. Both the Internal Revenue Service and The Illinois Department of Revenue love to audit these types of businesses. Everything is electronic. There are always records. If your accounting isn't done in the proper manner, you will not be in a position which can be defended. The Standard Accounting Packages section of our website may have what you need. If you have an audit, unfiled returns, need a second opinion or a payment plan, we can help. Call or e-mail the e-commerce and internet accounting specialists today.