Common Tax Write-Offs for Ecommerce Business Owners

Tax write-offs for ecommerce business owners helps you keep more of your hard-earned money. But here’s the thing — knowing what to write off is one thing, knowing how to categorize it correctly is another.

Yes, the internet is full of generic lists on tax deductions, but not every expense is DIY-friendly when it comes to tax filings. 

Some ecommerce tax write-offs or deductions come with complex rules and restrictions, and getting them wrong could mean missed savings or even IRS trouble.

That’s why in this blog, we’re walking you through the most critical expense tax write-offs and showing you how to apply them properly — whether through smart bookkeeping software or with the help of a dedicated bookkeeper.

Let’s dive in.

What Are Ecommerce Tax Write-Offs?

Ecommerce tax write-offs, also known as deductions, are business expenses that reduce your taxable income, ultimately lowering the amount of tax you owe.

In simple terms, the more eligible expenses you deduct, the less income you have to pay taxes on.

How Do Tax Deductions Lower Your Taxable Income?

Let’s say your ecommerce store made $100,000 in revenue this year. If you have $30,000 in eligible business expenses — like inventory costs, marketing, and software subscriptions — you only pay taxes on $70,000 of taxable income instead of the full $100,000.

Accurately tracking expenses ensures that you claim every deduction you’re entitled to while keeping your business IRS-compliant. 

If you don’t maintain accurate records, you risk:

❌ Overpaying taxes because you missed deductions

❌ IRS penalties if your deductions aren’t well-documented

❌ Cash flow issues from unexpected tax bills

Using bookkeeping tools or professional services like doola helps you categorize expenses, keep track of receipts, and stay organized for tax season. A robust bookkeeping system means maximized deductions and fewer tax headaches for your ecommerce business.

Essential Ecommerce Tax Write-Offs

Here are the essential ecommerce tax write-offs every online seller should know:

1. Inventory Costs

If you sell physical products, your cost of goods sold (COGS)—which includes manufacturing, wholesale purchases, packaging, and shipping materials — is fully deductible.

Pro Tip: Keep track of purchase invoices, supplier payments, and inventory shrinkage for accurate deductions.

2. Website & Hosting Expenses

Your ecommerce store lives online, which means domain registration, website hosting, and platform fees (like Shopify, WooCommerce, or BigCommerce) are all deductible.

Pro Tip: If you hire a web developer or designer, their fees are also a business expense!

3. Marketing & Advertising

Any money spent on promoting your business is a tax write-off. 

This includes:

✅ Facebook & Google Ads

✅ SEO & content marketing costs

✅ Influencer marketing & brand partnerships

✅ Email marketing tools like Klaviyo or Mailchimp

4. Software & Tools

Running an ecommerce store means relying on subscriptions and tools to manage operations. 

The cost of these tools is deductible, including:

✅ Ecommerce platforms

✅ Accounting software

✅ Inventory management tools

✅ Payment processing fees

5. Office & Home Office Expenses

If you work from home, you can deduct a portion of rent, utilities, and internet costs based on the percentage of space used for business.

💡 Pro Tip: Even if you don’t have a dedicated home office, business-related expenses like office supplies, furniture, and internet costs may still qualify.

6. Shipping & Delivery Costs

Shipping expenses are a major cost for ecommerce sellers. Luckily, they’re also deductible. This includes:

✅ Postage & courier fees (USPS, FedEx, UPS)

✅ Packaging materials (boxes, tape, labels)

✅ Insurance & tracking fees

7. Professional Services

If you hire lawyers, accountants, tax advisors, or bookkeeping experts, their fees can be deducted. This is crucial for staying tax-compliant and avoiding IRS headaches.

Pro Tip: doola Bookkeeping helps ecommerce sellers track finances and maximize tax deductions with expert guidance.

8. Business Travel & Meals

Traveling for business? Your flights, hotel stays, and 50% of meal expenses are tax-deductible — as long as they’re business-related.

9. Employee & Contractor Payments

If you have employees or hire freelancers (for design, marketing, or customer service), their wages and contractor payments are fully deductible.

10. Business Licenses & Permits

Any legal or regulatory fees, like LLC formation costs, business permits, and seller licenses, can be written off.

How to Keep Track of Ecommerce Tax Write-Offs

Tracking ecommerce tax write-offs is all about staying organized, avoiding tax season panic, and ensuring compliance. 

Here’s how you can do it right:

1. Use the Right Accounting Software

Manually tracking expenses is a recipe for mistakes and of course disasters. 

The best way to stay on top of your deductions, income, and taxes is to use ecommerce-friendly bookkeeping software like doola.

Why Shopify Sellers Choose doola:

Seamless Shopify Integration – Automatically sync sales, expenses, and taxes with your Shopify store for real-time financial tracking.

Effortless Expense Management – Easily categorize marketing, shipping, and inventory costs so you always know where your money is going.

Sales Tax, Simplified – No more manually calculating taxes across different states or countries — doola automates the process to keep you compliant.

Dedicated Human Support – Get a personal account manager who understands Shopify bookkeeping and is available when you need expert help.

US Business Bank Account Setup – Selling from outside the US? doola helps you open a US business bank account to streamline your transactions.

Custom Financial Reports – Access profit-and-loss statements, cash flow insights, and detailed forecasts to make smarter business decisions.

With a 4.6-star rating on Trustpilot and backing from Y Combinator, doola is the go-to bookkeeping solution for ecommerce sellers looking to simplify their finances and focus on growth. 🚀

2. Hire a Bookkeeper Rather Than Relying on DIY Bookkeeping

If you’re just starting out, DIY bookkeeping might seem like the cheaper option. But as your business grows, tracking every transaction, categorizing expenses, and filing taxes can get overwhelming.

DIY Bookkeeping: Works for small businesses with limited transactions. 

Hiring a Bookkeeper: Best for growing businesses that need hands-off financial management. A dedicated bookkeeper ensures accurate records, tax compliance, and optimized deductions.

3. Keep Digital Receipts & Records

Paper receipts fade, or become unreadable over time. That’s why keeping digital records is crucial.

✅ Use expense tracking apps like Expensify or Wave to scan and store receipts.

✅ Save invoices and receipts in cloud storage (Google Drive, Dropbox).

✅ Label all transactions properly — separate personal and business expenses.

Remember, missing receipts = disallowed tax write-offs.

How doola Bookkeeping Can Help You Stay Tax-Ready

Here’s how doola Bookkeeping can help you stay organized and tax-ready:

Automated Expense & Income Tracking

doola seamlessly syncs with your Shopify, Amazon, Etsy, or other ecommerce platforms to automatically track income and expenses. No more spreadsheets, just clear, organized records that make tax filing easy.

Real-Time Sales Tax Management

Sales tax laws are constantly changing, and keeping up with multi-state tax compliance can be a nightmare. doola automates tax calculations, so you never have to worry about overpaying, underpaying, or missing deadlines.

IRS-Ready Financial Reports

From profit-and-loss statements to cash flow summaries, doola provides clear, IRS-ready reports that ensure you’re always prepared for audits, deductions, and tax filings.

Dedicated Human Bookkeeper Support

With doola, you get a dedicated bookkeeping specialist who understands ecommerce and is available to answer your questions, flag potential tax savings, and ensure your records stay compliant.

Hassle-Free Business Bank Account Setup

If you’re selling from outside the US, doola helps set up a US business bank account — so managing revenue, paying suppliers, and handling taxes becomes seamless.

Book a demo with us to know more! 

FAQs

Can I write off my ecommerce business startup costs?

Yes! Startup costs like website setup, branding, inventory purchases, and marketing expenses can be deducted. Keep proper records to maximize your write-offs.

Are PayPal and Stripe transaction fees tax-deductible?

Absolutely. Payment processing fees from PayPal, Stripe, Square, or any other gateway are considered business expenses and can be deducted.

What’s the difference between a tax write-off and a tax credit?

A tax write-off (deduction) lowers your taxable income, while a tax credit directly reduces the amount of tax you owe — credits usually provide bigger savings.

Are influencer partnerships or sponsorships deductible?

Yes! If you pay influencers for brand promotions, it counts as a marketing expense, making it a deductible business cost.

What happens if I get audited and my deductions are questioned?

You’ll need proof of your expenses — receipts, invoices, and bank statements. Proper bookkeeping (like with doola Bookkeeping) helps keep your records audit-ready.

Do I need an accountant to claim ecommerce tax deductions?

Not necessarily, but a bookkeeper or tax expert can help you maximize deductions and avoid mistakes. Tools like doola Bookkeeping make tax prep stress-free.