Keeping business records for an online business is very similar to having a brick and mortar business. Start up and procedures are the same, but some of the expenses may be different.
Rather than having rent or mortgage payments and utility expenses, you will have monthly expenses for the privilege of being able to sell online. Consider the monthly fee you pay EBay for having your store as your "rent". Your utilities will include telephone and internet connection fees. If you have a home office that is used exclusively for your business, all of these expenses can be deducted when you file your income taxes.
The fees you pay EBay as their commission is no different than paying sales clerks in a shopping mall store their sales commissions. They are all tax deductible and should be included in your monthly expenses.
Simply keep a thorough record of all money that goes out and all money that comes in for the business.
If you are not using computer software to track your business expenditures you should at least have a ledger or some type of notebook in which to record all the transactions. Preferably a note book with pockets would be excellent as you can put the day’s receipts in the pocket and total them up weekly. Then you would have to record them on another page or note book as monthly expenses.
Office supply stores carry several note books specifically for this purpose. They can be recorded daily, weekly and monthly, with an accumulative running total. When tax time comes you do not have to go back and calculate the figures. The accumulative total is right there for you to use. This is definitely the best way to keep your business records.
You must keep all receipts for expenditures for at least three years. This includes such things as shipping materials, office supplies, printer ink and paper, sales books, pens, pencils, postage and shipping costs and much more.
Coin and stamp dealers and others on EBay or any other sales site can deduct the costs of magazines and value guides that are business related.
The costs of your products should also be recorded, whether you make them yourself or purchase them from another dealer.
If you are in a state that imposes a sales tax, it is up to you to collect and pay this tax to the proper authority. Keeping good sales records is essential for calculating the sales tax owed. Generally, you will only need to charge tax for sales in your home state. The tax is usually included when you enter the product for sale and set the prices and shipping costs.
Keeping thorough records of all transactions will make life a lot easier at tax time.