What expense category does Shopify fall under?

If you're using Shopify to run your online store, you might be wondering how to categorize these costs in your financial records. Properly classifying Shopify expenses helps keep your books accurate and makes tax time easier.

Classifying Shopify expenses

Shopify expenses can be categorized in several ways:

• Software subscriptions: Your recurring fees for Shopify plans.
• E-commerce platform fees: Costs for using Shopify's services to manage your store.
• Payment processing fees: Charges when customers make purchases, like transaction fees.
• Point of sale (POS) expenses: If you use Shopify's POS system for in-person sales.
• Shipping expenses: Fees from using Shopify Shipping for labels and discounts.

Examples of Shopify expenses

Here are some typical Shopify expenses you might encounter:

• Monthly subscription: Paying $29 per month for the Basic Shopify plan.
• Transaction fees: A 2% fee on sales if you're not using Shopify Payments.
• App fees: Costs from apps in the Shopify App Store, like SEO tools or email marketing add-ons.
• Hardware costs: Buying a $49 card reader for in-person sales through Shopify POS.
• Shipping label purchases: Spending $25 on shipping labels through Shopify Shipping.

For instance, if you pay for a $79 monthly plan, incur $15 in transaction fees, and spend $49 on a POS device, you'd record these under their respective expense categories.

Tax implications of Shopify expenses

Many Shopify expenses can be deductible when filing taxes.

• Business expense deductions: Subscription fees, transaction fees, and app charges are generally considered ordinary business expenses.
• Non-deductible expenses: Expenses like fines, penalties, and interest charges related to your Shopify business are generally not deductible for tax purposes.

Maintain receipts and documentation for all Shopify-related costs. Tax laws can vary, so it's wise to get advice on what you can deduct. Accurately recording these expenses can help you maximize deductions and stay compliant with tax regulations.

Let Ramp automate your expense process

Managing all these expenses doesn't have to be a hassle. Ramp can automate the categorization and tracking of your Shopify costs, saving you time and reducing errors. Spend less time on bookkeeping and more time growing your business.