Most e-commerce sellers start their books on whatever chart of accounts their accounting software creates by default, or one carried over from a template built for a generic small business. Neither structure separates platform fees from shipping cost, splits cost of goods sold from operating expenses in a way that supports margin analysis, or gives inventory its own visibility on the balance sheet. The result is books that produce a technically correct net income figure at year-end while telling the seller almost nothing useful about which products or channels are actually profitable.
This guide covers how to structure a chart of accounts for a Canadian e-commerce business so that it supports both tax filing and the margin, cash, and channel decisions sellers actually need to make during the year. The principles apply regardless of which platforms are used or which accounting software runs the books.
What the Chart of Accounts Needs to Do
For an e-commerce seller, the chart of accounts has to do more than categorize expenses for a tax return. It needs to:
- Separate revenue from the platform fees, refunds, and chargebacks netted against it in payout reports, so gross revenue is never understated by fees the seller never sees hit the bank account
- Split cost of goods sold from operating expenses, so gross margin is a real, calculable number rather than something buried in a single “cost of sales” line
- Track inventory as an asset, not an expense, until it sells
- Separate platform fees, advertising spend, and fulfillment costs from each other, since each behaves differently as volume scales
- Support GST/HST tracking across whatever mix of marketplace-collected and self-collected tax applies to the seller’s platforms
- Produce a usable income statement and balance sheet without a year-end reconstruction project
A seller running one product line on one platform can operate with a fairly simple version of this structure. A seller running multiple SKUs across Amazon, Shopify, and a marketplace or two needs the same categories, applied with enough consistency that the numbers can eventually be broken out by channel if that becomes necessary.
Revenue Accounts
Gross sales revenue. The starting point is the full sale price before any platform fees, not the net deposit that lands in the bank account. Amazon, Shopify, Etsy, and similar platforms settle payouts net of fees, referral commissions, and sometimes advertising spend, and recording only the net deposit as revenue understates sales and buries the fee expense inside a revenue figure where it cannot be analyzed.
Returns and refunds. A contra-revenue account tracking refunds separately from gross sales, rather than netting them silently against revenue, is what makes a return rate visible as its own metric. The returns, refunds, and chargebacks guide covers how these transactions should be recorded and their GST/HST treatment.
Multi-channel revenue. Sellers running more than one platform benefit from a revenue account (or class/tag, depending on the software) per channel, since channel-level revenue is the starting point for channel-level profitability, covered in the multi-channel reconciliation guide.
Cost of Goods Sold Accounts
COGS should be its own section of the chart of accounts, separate from operating expenses, so gross margin (revenue minus COGS) is calculable directly from the income statement rather than requiring a manual pull of specific line items.
- Inventory purchases / product cost. The landed cost of inventory as it moves from asset to expense when sold, covered in the landed cost guide.
- Freight and duties on inbound inventory. Import duties, brokerage fees, and inbound freight are part of the cost of the inventory, not a general operating expense, and should flow into COGS through the landed cost calculation described in the import duties guide.
- FBA or 3PL fulfillment fees tied to units sold. Fulfillment fees that scale with units shipped are often tracked with COGS or direct selling costs for management reporting rather than buried in overhead, since they are a direct cost of delivering the specific sale.
Keeping these separate from platform referral fees and advertising spend, discussed below, is what allows a seller to see gross margin before marketing and platform costs, and then see the fully loaded margin after those costs, as two distinct numbers rather than one blended figure.
Platform and Marketplace Fee Accounts
Platform fees are not COGS and are not general overhead. They deserve their own section because they are large, they vary by platform, and they need to be visible on their own to evaluate whether a given channel is actually worth the volume it produces.
- Referral or commission fees (Amazon referral fee, Etsy transaction fee, eBay final value fee)
- Payment processing fees (Shopify Payments, PayPal, Stripe), separate from marketplace commission fees even where both apply to the same sale
- Subscription or account fees (Shopify plan, Amazon Professional seller account)
- Advertising spend by platform (Amazon PPC, Meta Ads, Google Ads), tracked separately from the transaction fees above since advertising is a discretionary spend decision, not a fixed cost of the sale
Sellers evaluating whether a platform is truly profitable need these broken out individually rather than combined into one “platform fees” account. The advertising spend and true profitability guide and the Amazon FBA true profitability guide walk through how each fee type affects true margin differently.
Inventory as a Balance Sheet Asset
Inventory purchased but not yet sold is an asset, not an expense. A chart of accounts that expenses inventory purchases immediately when the invoice is paid, rather than recording it as inventory and moving it to COGS as units sell, distorts both the balance sheet and the income statement, particularly around Q4 inventory builds ahead of peak season.
The inventory asset account should be reconciled against a physical or perpetual inventory count on a regular basis, not just assumed correct because the accounting entries look consistent. The inventory reconciliation guide and the inventory cash flow guide cover how this account is maintained and why it becomes a cash flow issue when it is not.
GST/HST and Sales Tax Accounts
The chart of accounts needs to track GST/HST collected on sales, input tax credits on eligible expenses, and, depending on the seller’s platform mix, amounts collected and remitted by a marketplace or distribution platform operator rather than the seller directly.
Where a marketplace or distribution platform operator is responsible for charging and remitting GST/HST under the platform rules, that tax should not run through the seller’s own GST/HST payable account, since the seller is not the one remitting it. Where the seller is the registered vendor responsible for collecting directly (typically on a self-hosted Shopify store, and sometimes on marketplace sales depending on the platform and seller status), a standard GST/HST payable and ITC structure applies, parallel to any other Canadian business. Sellers registered in Quebec, or selling into British Columbia, Saskatchewan, or Manitoba, need additional accounts for QST or the relevant provincial sales tax. The multi-platform GST/HST guide and the provincial sales tax guide cover which structure applies to which platform.
Operating Expense Categories
Below COGS and platform fees, the remaining operating expenses follow a fairly standard small business structure, with a few categories worth calling out specifically for e-commerce:
- Software and subscriptions (inventory management tools, repricing software, accounting software)
- Warehousing and storage, separate from per-unit fulfillment fees if the seller uses dedicated storage space
- Packaging and shipping supplies not already captured in landed cost or fulfillment fees
- Professional fees (accounting, legal)
- Bank and merchant account charges
Every operating expense account should map to a clear line on the business’s tax filing, whether that is a T2125 category for a sole proprietor or a GIFI category for a corporation, so there is no ambiguity about how a given account translates at filing time.
Setting Up Bank Feeds and Payout Reconciliation
Most of the accounts above depend on payout report data, not just a bank feed. A bank feed shows the net deposit from a platform; it does not show the gross sale, the fees deducted, or the refunds netted out before the deposit was made. Connecting an inventory or e-commerce accounting integration that can import payout report detail, rather than relying on the bank feed alone, is what allows the chart of accounts structure above to actually populate correctly rather than collapsing into a single net deposit entry. The Shopify payouts report guide and Amazon settlement report guide cover what that detail looks like for each platform.
Common Setup Mistakes
Recording only net deposits as revenue. This understates gross sales and hides platform fees inside what looks like a revenue shortfall rather than an identifiable expense category.
Expensing inventory purchases immediately. This overstates expenses in the purchase month and understates them in the sale month, distorting margin in both directions depending on the season.
Combining all platform fees into one account. This makes it impossible to evaluate whether a specific fee type, or a specific platform, is eating into margin more than the others.
No separate COGS section. Without COGS split from operating expenses, gross margin has to be reconstructed manually rather than read directly off the income statement.
Treating marketplace-collected tax as the seller’s own GST/HST liability. This overstates the seller’s remittance obligation on sales where the marketplace, not the seller, is the deemed supplier collecting and remitting the tax.
Where This Fits with Broader Bookkeeping
A chart of accounts built around these categories is the foundation the month-end close checklist and channel-level profitability analysis both depend on. Setting it up correctly before transaction volume grows is considerably less work than restructuring a year of miscategorized entries once the business has outgrown a generic small business template.
Get in touch if your current books are not giving you a clear read on margin by product or channel, and you want help restructuring the chart of accounts to fix that.