Important tax question about shipping deduction

[gfv]

Hello community!
I am almost finished doing my taxes through Turbotax.
I have an important question regarding a deduction.

Can I deduct the “shipping income” from the year which totals $11,575

I do not keep that income, it is used to pay for shipping labels:
from my paypal account:
“eBay Inc Shipping Preapproved Payment”

This is a very significant deduction, and I want to be sure I am filing correctly before I go ahead and finish with my turbo tax.

And if I do make this deduction, do I list it in the other expenses line?

I found this online, has anyone written this deduction in as “Postage and delivery”

“Also, you most likely pay for shipping on these goods. Postage and delivery can also be deducted since it is necessary for the conduct of online business. Postage and Delivery can be deducted as an other expense, and you would write in “Postage and delivery” in Part V of the Schedule C.”

Thanks fellow scavengers..Much gratitude on expedient thoughts and discussion!!

– J

• This topic was modified 8 years, 3 months ago by gfv.

[MDC Galleries & Fine Art]

This is what is called an offsetting expense. Yes, everyhting you spend on paying Ebay for shipping labels and fees are an “expense” BUT you also have to declare the money you receive from your customers as “Income”, thus “offsetting”. You will pay taxes only on the difference if you “receive” more income than your expenses, except if you have other deductions to declare that will wipe out that small profit.

Example, you get $4,000 income from your customers [which you can see those break outs on your monthly PayPal statement] that is their share of the shipping they paid, then you have to pay [reimburse] Ebay/PayPal for what they do [labels, pay USPS for you and their fees] of $3,750, that then leaves you a profit that would be taxable of $250. But once you deduct all your other “office expenses”, such as “office supplies”, tape, plain vanilla boxes, staples, pencils, pens, trash bags, etc., etc. that $250 dollar profit is pretty much wiped out, so a wash. But in a double entry accounting system, you have both an income stream and an expense stream which pretty much “offsets” each other.

Hope this makes sense. If I am wrong there are others here who are practically Accountant type guru’s who will straighten me out.
mike at MDC Galleries in Atlanta

[gfv]

Here are details on my yearly totals if that helps, because I don’t understand if the response above is saying that I can deduct the shipping income or not.

I had around $70,000 in gross sales.
I had $21,290 in eBay and Paypal fees.
Cost of goods sold $6495

Thanks all
– J

[Jay]

Yes, you can deduct the cost of shipping. It’s not a profit.

[eCommerce411.us]

Hey gvf,
Are you sure your numbers correct? How can you be paying 30%+ in fees on gross sales of $70K. It doesn’t make sense. Even if I assume and factor in an Anchor store at $3600/year and/or include the $11k you stated in buyer paid shipping from your gross, it still doesn’t come close. Something is wrong.

A general rule of thumb I recommend is factor in 15% in ebay and paypal fees, total (excluding store fees). Obviously category and dollar amount will factor into it.

Quick answer to your initial question is that it nets out the same and will not affect your net income either way. How you handle it on your books is an accounting issue and more for use in measuring how resources are spent in the process of running a business.

Preferred method is to include shipping related to sales into your COGS. This reflects expenses directly incurred because a sale has taken place.

Shipping expenses not due to a sale should be itemized under Operating Expenses. This is the cost of running your business independent of sale transaction.

[gfv]

Thanks Jay, my name is also Jay.
Thank you for your clear response, to clarify though:
When I make this deduction, do I list it in the other expenses line?
Is this written as “Postage and delivery” ?

Thanks!

[Jay]

Not sure. The money we pay our accountant to do our taxes is worth every penny since I dont have to know these details. But I do know that our shipping costs are all deductible as a business expense.

[Retro Treasures WV]

Yes, all of your ebay and paypal fee expenses as well as shipping costs get separate line items in the “other expenses” category. I use Godaddy book keeping and their summary breaks it down pretty well. I just match the title and amounts to what Godaddy gives me.

• This reply was modified 8 years, 3 months ago by Retro Treasures WV.

[Author]

Posts