E-commerce retail sales of furniture are growing faster than traditional brick-and-mortar furniture retail sales. Projections have it growing by 15 percent each year. As an e-commerce retail entrepreneur, you are likely excited by this projected growth. However, there are complicated tax issues that can impact your e-commerce/retail furniture company tax planning.
Handling E-Commerce Retail Furniture Company Growth Related to Tax Issues
The rapid growth of e-commerce furniture sales is exciting. However, it may force small to medium-size retailers to address tax issues that were avoidable just a few years ago. For example, furniture retailers may need to determine if their items are considered a luxury. If so, retailers may need to include the ad valorem luxury tax on the products or services they offer.
Luxury taxes are added to products or services that are deemed to be unneeded or nonessential. This is an indirect tax that increases the price of a service or good offered. E-commerce/retail furniture company tax planning could mean that your business reevaluates the way that your warehouse and sales production strategies are now impacted by tax law. Your e-commerce/retail furniture accountant may even be included in discussions with your web designer, making sure that they are including features in your website that factor in changes in tax law in real time.
Accurately Tracking Inventory Amounts
Likely, you rely on your e-commerce/retail furniture accountant to assist in tracking inventory amounts. You want to have a sufficient amount of inventory in stock to meet customer demand. Accurate inventory affects your e-commerce/retail furniture company accounting, including your taxes.
Much of the stress of end-of-the-year tax preparation can be avoided if throughout the year, your e-commerce/retail furniture company accounting accurately tracks goods sold and purchased and keeps track of revenue and profits.
Along with your e-commerce/retail furniture company CPA, you will need to choose the system you will use for monitoring inventory. Two of the more popular inventory methods include:
This is one of the easier ways for you to track your inventory. The items you sell and the items received are recorded as the changes occur. Most e-commerce businesses do this using an integrated point-of-sale application. When inventory is received, the item is assigned an SKU number. When the inventory is sold, it is marked as removed from your inventory.
Even though much of the work done is automatic, you will need to manually count products. This is because automated accounting does not factor in products that are depleted for a non-sales reason. For example, an employee could break an item or a piece of furniture could be stolen.
This form of tracking is less convenient and more labor intensive. It requires you to periodically count all of your inventory and track it. You could do it every week, every month, or within another set period. The downside of this method from the standpoint of an e-commerce/retail furniture company CPA is that you have no idea what items were sold and what items were broken because nothing is being logged by an automated system. E-commerce retailers that also have a brick-and-mortar store may opt to use both the perpetual and periodic methods.
Increase Accounting Efficiencies
We at Fusion CPA offer e-commerce/retail furniture company CFO advisory to small and medium-size companies in and around Atlanta, Georgia and the U.S . We provide bookkeeping, tax planning, and general accounting services and advice. Our team of accountants are available to answer all of you E-commerce/ retail questions if you find your company scaling without professional tax advice. You can depend on us to minimize your tax burden. We are also familiar with many accounting platforms and can help you implement the best software for your industry. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive