Why Accounting for E-Commerce Is Different (and How to Get It Right)

Running an e-commerce business is a different beast — and so is accounting for it.

Unlike traditional retail, e-commerce businesses deal with fragmented platforms, layered fees, multiple sales tax jurisdictions, and a complex web of digital payouts. If you're a Canadian business selling through Shopify, Amazon, Square, or Etsy, your numbers are likely more tangled than you think.

This guide breaks down why accounting for e-commerce is different, what to look out for, and how to build a system that works — not just at tax time, but year-round.

1. Your Sales Platform Is Not Your Financial Statement

With e-commerce, money flows through gateways and marketplaces before it lands in your bank — and along the way, fees, refunds, and timing delays make it difficult to reconcile.

For example:

• Shopify reports gross sales, but fees aren’t visible unless you dig through payout reports

• Amazon holds back funds and issues biweekly payouts — often with delays or adjustments

• Square processes payments instantly but deducts fees off the top, affecting cash flow visibility

Real scenario: A Toronto-based Shopify merchant selling $100,000 in revenue may only see $92,000 in their bank account after fees and refunds. If they record only deposits, they underreport revenue and distort profit margins — which affects both CRA compliance and business decisions.

2. Inventory Isn’t Just a Line Item — It’s a Compliance Risk

Whether you're using in-house fulfillment or Amazon FBA, inventory accounting is one of the most misunderstood areas in e-commerce.

Canadian tax law requires inventory to be capitalized — not expensed — until items are sold. That means:

• Inventory purchases are added to your balance sheet

• Cost of Goods Sold (COGS) is recognized only when the product ships

• Returns, damaged stock, or bundles must be tracked carefully

Why it matters: Misclassifying inventory can inflate or deflate profits, leading to CRA scrutiny and poor visibility into your true business performance.

3. GST/HST Rules for Online Sellers Aren’t Optional

If you're selling to Canadian customers, you're on the hook for federal and provincial sales tax — and the thresholds apply whether you're selling online or in person.

Key things to know:

• If you exceed $30,000 in taxable revenue in any 12-month period, you must register for GST/HST

• Provincial rates vary — e.g., Ontario (13%), BC (12%), Quebec (14.975%)

• Some platforms (like Amazon) remit tax on your behalf for certain orders — but you're still responsible for accurate filing and reporting

👉 Official CRA reference: Do You Need to Register for a GST/HST Account?

Incorrect setup in your Shopify or Amazon tax settings can lead to missed collections, under-remittance, or audit triggers. Review your platform’s tax mapping regularly.

4. Multi-Currency Sales? Now You're a Foreign Exchange Manager

Many Canadian sellers operate in both CAD and USD — especially on Amazon or Etsy.

But CRA requires you to report all income in CAD, which introduces complications:

• You must convert sales using Bank of Canada rates (daily or monthly averages)

• Gains/losses from currency fluctuations must be tracked — even if you never transfer funds

• Payout platforms like PayPal or Stripe often hold foreign balances, requiring you to report unrealized gains/losses

This can significantly affect your year-end reporting and tax position if not monitored consistently.

5. DIY Tools Alone Won’t Solve the Chaos

QuickBooks, Xero, and Wave are popular, but they aren't “e-commerce ready” out of the box.

To make your accounting system e-commerce friendly, you need:

• Platform integrations (e.g., A2X for Shopify/Amazon)

• A chart of accounts built to track sales, fees, discounts, shipping, refunds, and taxes separately

• Regular reconciliations between platform reports, payout statements, and bank deposits

Without structure, your reports might look clean — but fail to tell the real story.

How to Get It Right (and Keep It That Way)

Accounting for e-commerce isn’t just about keeping records — it’s about building a system that adapts as your store grows.

Here’s how to make it work:

• Integrate your e-comm platforms with your accounting software

• Track gross revenue, refunds, and platform fees separately

• Record inventory accurately as COGS, not an expense

• Stay up to date with GST/HST rules and registration thresholds

• Reconcile payout reports regularly, not just at year-end

• Don’t rely on bank feeds alone — they're not the full picture

Get Expert Help from E-Commerce Accounting Specialists

At ProLedger, we work with e-commerce sellers across Canada who want clean books, tax-ready reports, and visibility into their true profitability.

We specialize in:

• Accounting system setup tailored to Shopify, Amazon, Square, and Etsy

• GST/HST and CRA compliance

• Reconciliation of payment processors and inventory

• Ongoing support, so you're never left guessing

Want to Clean Up Your E-Commerce Accounting?

Let’s take the complexity off your plate. Book a free discovery call today — and let’s make your numbers work for you, not against you.