Bookkeeping & Tax Tips for NJ E-Commerce Businesses: Navigating Online Sales and Nexus

Running an online store is exciting — but managing finances can get tricky. These NJ e-commerce bookkeeping and tax tips will help you stay compliant, organized, and profitable year-round. From handling sales across state lines to tracking inventory and online platform fees, it’s a lot to manage. Here’s a guide tailored to NJ e-commerce sellers – whether you’re an Amazon storefront, Etsy artisan, or have your own Shopify site – covering key tips to keep your finances on track and tax-compliant.

1. Master New Jersey Sales Tax for Online Sales

Even if your store is virtual, sales tax rules still apply. New Jersey requires out-of-state (and in-state) online sellers to collect NJ sales tax if they have economic nexus – that is, over $100,000 in sales or 200 transactions to NJ in a year. This threshold means even a business with no physical NJ presence must register and collect tax once they exceed it. The good news: if you sell through a marketplace facilitator (like Amazon, Etsy, eBay), the marketplace is responsible for collecting and remitting NJ sales tax on your behalf for those sales. For example, Amazon will automatically collect 6.625% on your sales to NJ customers and remit it – you don’t have to do that (in fact, NJ law forbids marketplace sellers from collecting on sales the marketplace handles). But if you also sell on your own website, or via channels where you are the merchant of record, you must collect tax on those once you cross nexus. Keep track of your NJ sales totals excluding marketplace sales. Tip: Register for NJ sales tax before you hit the threshold, if you’re approaching it, so you don’t accidentally exceed it without collecting (NJ’s threshold law says you should register once you expect to exceed it). Also be mindful of what’s taxable: tangible goods of course, but NJ also taxes digital products (like e-books, online courses) and many services. If you’re selling digital downloads or SaaS subscriptions to NJ customers, those are taxable in NJ. Shipping charges in NJ can be taxable if you don’t separate them or if they’re mixed with handling – ensure your e-commerce platform separates shipping on invoices, as delivery charges for taxable goods are generally taxable in NJ unless stated separately purely as postage.

2. Track Inventory and Cost of Goods Sold (COGS) Meticulously

E-commerce businesses often have physical inventory – whether you stock product at home, a warehouse, or use Fulfillment by Amazon (FBA). For tax purposes, you must account for inventory and calculate COGS annually. That means tracking beginning inventory, purchases, and ending inventory to determine the cost of items sold. Good bookkeeping software or an inventory management system is vital. Even if you’re a cash-basis taxpayer, inventory must be accounted for on accrual for tax (you can’t just expense all purchases; you expense them when sold). In NJ, COGS is treated similarly as federal for income – it reduces your business income (thus lowering both federal and NJ taxes). If you use Amazon FBA, be aware of where your inventory is stored – inventory stored in NJ could create physical nexus for sales tax (though the economic nexus thresholds override that now, but in any event Amazon collects for you). Still, inventory storage might require you to file a business personal property tax in some states (NJ doesn’t have a separate property tax on inventory for most businesses, though). Tip: Do a year-end inventory count. This not only helps with accurate financials but also can reveal shrinkage or issues. Plus, NJ offers a partial sales tax exemption on certain capital purchases and there’s no sales tax on inventory bought for resale (use the ST-3 resale certificate to buy from wholesalers tax-free). Keep copies of resale certificates and ensure you’re not paying sales tax on inventory – otherwise you’d be paying tax twice (once when buying, once when selling).

3. Understand Multi-State Tax Obligations (Beyond NJ)

Selling online often means customers in many states. Sales Tax: Each state has its own economic nexus thresholds (many are $100k/200 transactions like NJ, but some differ). You might need to register in multiple states if you grow large. Prioritize big markets and watch your sales data. Using a service like Avalara or TaxJar can automate multi-state collection. Income Tax: The good news is selling to customers in other states usually does not create income tax nexus if you’re just shipping goods (physical presence like an office or employee in a state would, though). By federal law (P.L. 86-272), mere solicitation of orders for tangible goods shipped across state lines is protected from income tax in the destination state. So, you likely won’t file income tax returns in every state you have customers – only NJ (and your resident state if different). But one caveat: if you sell digital goods or services, that law doesn’t protect you, so be careful if you have significant revenue from, say, software subscriptions in other states – those states might assert income tax nexus with economic thresholds. It can get complex, so consult a CPA if expanding big. Marketplace Facilitator Laws: As mentioned, states like NJ, NY, PA, etc., all require marketplaces to handle sales tax. So your direct compliance burden might only be for your own website sales. However, keep records of marketplace sales and tax collected. You shouldn’t include marketplace-collected tax in your revenue (it’s not your income), but you should reconcile that everything was properly remitted by the platform. New Jersey even says you should not collect on marketplace sales – so don’t double charge tax on Amazon orders!

4. Deduct All Your E-Commerce Expenses (and Track Them Separately)

Online businesses have some unique costs: platform fees (Etsy listing fees, Amazon referral fees, Stripe or PayPal payment processing fees), shipping and packaging costs, website hosting, online advertising, maybe VA (virtual assistant) or freelance services. All these are tax-deductible business expenses. It’s important to properly categorize them in your books so you don’t miss any deductions. For example, merchant fees and payment processing fees can add up to thousands – they directly reduce your gross revenue, but still you should record gross sales and the fee as an expense for clarity. Similarly, advertising (Facebook/Google ads), software subscriptions (Shopify plan, QuickBooks subscription), home office (if you run operations from home, take that deduction if eligible), mileage or auto if you drive to the post office or UPS often – track it! New Jersey follows federal treatment for most business expenses, with a few exceptions. One NJ quirk: if you’re a sole proprietor or partnership, NJ does not allow a deduction for Section 179 depreciation in the year of purchase like federal does; instead NJ spreads it out. But that’s more for big equipment – most e-com businesses won’t be heavy on machinery expenses. Just be aware when your CPA does your NJ return, some depreciation could be adjusted. Also note, NJ does not allow the QBI 20% deduction that federal gives to pass-through owners – but that’s not an “expense” you control, just a difference in final tax calculation.

5. Leverage Technology for Bookkeeping Automation

When you’re selling on multiple online channels, manual bookkeeping can become a nightmare. Use integration tools or an e-commerce friendly accounting system. For instance, QuickBooks or Xero can integrate with Shopify or Amazon through apps (like A2X, Webgility, etc.) that automatically pull in sales, fees, and taxes. This not only saves you time but ensures accuracy (each payout is properly split into sales, sales tax, fees, etc.). Bank feed rules can be set up – for example, every deposit from Stripe can be auto-recorded to Sales minus fees if you set up the logic (see our blog on Bank Feed Rules NJ for tips on automation). With good systems, by year-end you should easily produce profit & loss statements and have all transactions categorized. Inventory accounting software (like QuickBooks Commerce or Stitch Labs) can help track COGS and inventory levels, which is crucial when scaling. The effort you put into a solid bookkeeping workflow will pay off at tax time – your CPA can more quickly prepare returns (lower bill for you) and you’ll have insight into profitability by product, market, etc. Many NJ small businesses are adopting cloud accounting – as a modern CPA firm, we strongly encourage it, and we help clients implement these tools so they know their numbers monthly, not just at tax time.

6. Monitor Nexus and Law Changes Regularly

E-commerce regulations evolve. For instance, New Jersey introduced the Digital Product tax in recent years – so now your online course PDF is taxable. Other states keep tweaking economic nexus thresholds or introducing weird rules (Colorado has unique sales tax sourcing, etc.). If NJ or federal laws change (like if Congress passes an interstate sales tax simplification or new requirements), stay informed. An example on the horizon: the federal INFORM Act requires online marketplaces to collect info on sellers to prevent fraud. Not directly a tax law, but compliance for sellers (you might have gotten requests from Amazon for your NJ business license or EIN documentation – provide it to avoid account issues). Also, as mentioned earlier, Form 1099-DA will start in 2026 for 2025 sales – that’s mostly on platforms to issue, but if you do self-fulfill sales through certain processors, you may receive 1099-B or 1099-K forms summarizing transactions. Be sure to reconcile those with your books so your reported income matches what IRS sees.

Running an e-commerce venture means wearing many hats – marketer, fulfillment manager, customer service, and yes, accountant. By staying organized with your finances and proactive on compliance, you can avoid nasty surprises like a nexus notice from a state or an IRS letter about unreported income. If this feels overwhelming, consider working with a CPA who understands online business (we at Monaco CPA have helped clients selling everything from custom jewelry on Etsy to high-volume Amazon sellers). We can assist with sales tax registrations, setting up your books, and tax planning to minimize what you owe. With the right systems and support, your NJ e-commerce business can grow smoothly and profitably, while staying on the right side of tax laws in all the places your customers live.

Ready to Simplify Your E-Commerce Bookkeeping and Taxes?

At Gregory Monaco, CPA LLC in Livingston, NJ, we help e-commerce entrepreneurs stay organized, compliant, and profitable in a fast-changing online marketplace. Whether you sell on Amazon, Etsy, Shopify, or your own website, our CPA team provides hands-on support to keep your bookkeeping, sales tax, and financial reporting running smoothly.

We specialize in helping New Jersey online sellers manage sales tax nexus, automate bookkeeping systems, and plan for year-end taxes — so you spend less time stressing over spreadsheets and more time growing your business. From tracking inventory and merchant fees to reconciling marketplace payouts, we’ll ensure your records are accurate and your tax filings complete.

Whether you’re just starting your e-commerce store or scaling a six-figure online operation, we’ll guide you through every step of sales tax compliance, multi-state reporting, and smart bookkeeping automation.

Let’s make your e-commerce finances streamlined, accurate, and ready for tax season — every month of the year.

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Gregory Monaco, CPA | Livingston NJ (serving NJ + virtual nationwide)