Etsy Bookkeeping: How to Track Sales, Fees and Profit for Your Shop
How to keep books for an Etsy shop: record gross sales and every fee separately, treat deposits as transfers, reconcile your payment account each month and get ready for Form 1099-K and Schedule C.
Short answer: do not record your Etsy deposits as income. Record each month’s gross sales, shipping charged and refunds as income, record every Etsy fee as an expense, and treat the money Etsy sends to your bank as a transfer between your own accounts. Then check that sales minus refunds minus fees equals what Etsy deposited. Done this way, your books show what you really sold, what Etsy really cost you and what you really earned.
This guide is for sellers in the United States who keep their own books, usually in a spreadsheet. It builds on our small business bookkeeping guide and our Etsy profit calculator, which explains each fee. It is general information, not tax advice.
Why Etsy bookkeeping trips people up
- Deposits are net. Etsy takes its fees, shipping labels and Etsy Ads out of your payment account before paying you, so a deposit is never the same as your sales.
- Sales tax passes through. On US orders, Etsy collects and remits sales tax where marketplace rules require it. That money is not yours, but Etsy’s payment processing fee is still charged on it.
- Many small fees. Listing renewals, transaction fees, processing fees, Offsite Ads and Etsy Ads arrive as separate lines.
- Tax forms show gross amounts. Form 1099-K reports the gross amount of payments, not what reached your bank, so books that only record deposits will not match it.
Step 1: Set up Etsy-specific categories
| Type | Category | What goes in it |
|---|---|---|
| Income | Etsy item sales | Item prices of orders, before fees |
| Income | Shipping charged | Shipping and gift wrap buyers paid |
| Income (negative) | Refunds | Money returned to buyers |
| Cost of goods sold | Materials and packaging | What goes into each item and its packaging |
| Cost of goods sold | Postage and shipping labels | Labels bought on Etsy or elsewhere |
| Expense | Etsy fees | Listing, transaction, payment processing and currency conversion fees |
| Expense | Advertising | Offsite Ads fees and Etsy Ads |
| Not income | Sales tax collected by Etsy | Track it for reference only |
| Transfer | Etsy deposits to bank | Movements between your Etsy payment account and your bank |
Keeping Etsy fees and advertising separate lets you see whether ads pay for themselves. If you sell on more than one platform, add the platform to each line so you can compare them.
Step 2: Collect the data each month
Etsy’s Shop Manager lets you download your order data and view monthly statements of your payment account, which list sales, refunds, fees and deposits. Download both at the start of each month for the month before and save them in that year’s records folder. Keep receipts for materials, packaging and postage bought outside Etsy as you would for any business.
Step 3: Record the month as gross figures
Here is an illustrative month for a US shop: 40 orders, $1,200 of item sales, $160 of shipping charged, one $30 refund and $84 of sales tax collected by Etsy. Two orders worth $70 in total came through Offsite Ads at 15%. The seller bought $140 of shipping labels on Etsy and spent $25 on Etsy Ads. The figures are an example, and for simplicity it ignores any fee credits on the refund.
| Line | Calculation | Amount ($) |
|---|---|---|
| Item sales | 1,200.00 | |
| Shipping charged | 160.00 | |
| Refunds | −30.00 | |
| Net sales | 1,330.00 | |
| Listing fees | 50 listings published or renewed × $0.20 | −10.00 |
| Transaction fees | 6.5% × 1,360 | −88.40 |
| Payment processing fees | 3% × 1,444 + 40 × $0.25 | −53.32 |
| Offsite Ads fees | 15% × 70 | −10.50 |
| Etsy Ads | −25.00 | |
| Shipping labels bought on Etsy | −140.00 | |
| Deposited to bank | 1,002.78 |
If this seller recorded only the deposit, the books would show $1,002.78 of income and no fees at all. Recorded gross, they show $1,330 of net sales and $327.22 of Etsy charges — and the profit and loss tells the true story. After $260 of materials and $40 of packaging bought elsewhere, profit for the month is $1,330 − $327.22 − $300 = $702.78, or about 53% of net sales, before the seller’s own time.
Step 4: Reconcile the Etsy payment account
Treat your Etsy payment account like a bank account. Each month:
- Start with the balance at the beginning of the month.
- Add net sales and shipping, subtract refunds, fees, labels and ads.
- Subtract deposits sent to your bank.
- Compare the result with the ending balance on Etsy’s statement.
Then check that each deposit appears in your business bank account on the right date, and record it there as a transfer, not as income. If the numbers do not agree, look for an order recorded in the wrong month, a missed refund or a fee you did not record.
Step 5: Prepare for taxes
- Form 1099-K. According to the IRS, payment apps and online marketplaces must file Form 1099-K when a seller’s payments exceed $20,000 in more than 200 transactions, after the One, Big, Beautiful Bill reinstated that threshold. You may still receive one below it.
- Report all income anyway. The IRS states that whether or not you receive a Form 1099-K, you must still report your income — see Understanding your Form 1099-K.
- Match gross to gross. Because Form 1099-K shows gross payments, your gross sales records make it easy to explain the difference between the form and your income after refunds and fees.
- Schedule C. Sole proprietors report shop income and expenses on Schedule C (Form 1040). Naming your categories so they map onto its lines saves time at year end.
- Keep records. Save Etsy statements, order downloads and receipts for as long as the IRS record-keeping rules require; our bookkeeping guide summarizes them.
A tax professional can confirm how these rules apply to your shop, including state sales tax obligations on sales outside Etsy.
A monthly Etsy routine
- Download the order data and payment account statement for the previous month.
- Enter one summary line per category, using the gross figures.
- Add materials, packaging and other costs from your receipts.
- Reconcile the Etsy payment account and the bank deposits.
- Read the month’s profit and loss — see how to read a profit and loss statement — and check whether prices still cover your costs with our guide on how to price handmade products.
A spreadsheet works well for this; our guide to building a bookkeeping template in Excel shows the layout and formulas.
Frequently asked questions
Should I record every Etsy order separately?
You can, but monthly totals per category from Etsy’s statement are usually enough for a small shop, as long as you keep the downloads that back them up.
Is the sales tax Etsy collects my income?
No. Where Etsy collects and remits sales tax, the tax is not your income. Track it for reference so your totals match Etsy’s reports.
Are Etsy fees tax-deductible?
Fees paid to sell your products are generally business expenses. Confirm the treatment of your specific costs with a tax professional.
What if my Form 1099-K does not match my books?
That is common, because the form shows gross payments. Reconcile it to your gross sales and shipping, then show refunds and fees as separate lines in your records.