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Accounting for Businesses Selling Through Social Media Shops (Instagram, TikTok, Facebook)
Plan your expenses and deductions strategically each year
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Maintain accurate and organized financial records for easy reporting
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Talk to a tax professional for expert guidance
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Personalized Marketing: AI helps in analyzing customer data to create personalized marketing campaigns
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Use accounting and tax software to make management easier
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Accounting for Social Commerce: Managing Sales from Instagram, TikTok & Facebook Shops
Introduction
Selling directly on social media isn’t just a trend — it’s now a full-fledged business model. With platforms like Instagram Shop, TikTok Shop, and Facebook Marketplace, small businesses are transforming likes and views into real revenue. But behind every viral product post is a web of financial activity: fees, ads, shipping, taxes — and all of it needs proper accounting.
This guide will help you keep your books clean, your profits clear, and your growth on track as you build your brand through social commerce.
Tracking Income by Platform
Most social selling platforms batch your payouts and deduct fees automatically, which can make reconciling your income tricky. To ensure accurate financial records:
- Record gross sales (the total amount the customer paid)
- Subtract platform fees, transaction charges, returns, and discounts
- Create separate income accounts for each platform (e.g., “Instagram Sales,” “TikTok Shop Sales”) so you can compare performance easily
💡 Pro tip: Matching payout reports from each platform with your accounting software ensures nothing gets missed.
Advertising, Commissions & Promotions
To drive traffic and visibility, most businesses invest in:
- Paid ads and boosted posts → Track as Marketing Expense
- Affiliate or influencer payments → Log as Commission Expense
- Marketplace deductions (like TikTok Shop's order commissions) → Categorize under Cost of Sales
Labeling these expenses clearly helps you measure your return on investment (ROI) by platform or campaign — key for scaling smartly.
Inventory & Fulfillment Tracking
If you’re selling physical products:
- Track inventory using SKUs or product codes
- Record purchases when restocking and log usage when products are sold
- Separate shipping costs under “Fulfillment Expenses” to understand your true cost-per-order
- Account for returns and damaged items to keep COGS and inventory accurate
Tools like Shopify, Square, and GoDaddy can connect your store to accounting systems to automate these workflows.
Sales Tax Compliance
Sales tax for social commerce depends on your location and nexus rules. Some platforms (like Facebook or TikTok) may collect and remit sales tax for you in certain states — but not everywhere.
To stay compliant:
- Know where you have nexus and whether you’re required to register
- Create a “Sales Tax Payable” liability account
- Keep collected tax amounts separate from sales revenue
- File monthly or quarterly, depending on your state requirements
🚨 Important: Sales tax compliance is one of the top triggers for audits — don’t let it slip through the cracks.
Insights & Financial Reporting
Once you’ve categorized income and expenses by platform, you can use reports to:
- See which channels drive the highest net revenue
- Compare ad spend vs. sales lift per platform
- Forecast future inventory needs based on order patterns
- Understand your true profit margin after fees, shipping, and promos
This kind of insight lets you double down on what’s working and phase out what isn’t — without guesswork.
🎯 Final Tip
Selling on TikTok or Instagram might feel effortless — but managing the finances behind it shouldn't be an afterthought. The brands that track platform-specific performance don’t just go viral — they stay profitable.
Need help cleaning up your social commerce accounting?
Whether you're running a one-product store or managing multiple social storefronts, Peak Accounting can help you set up smart systems, stay tax-compliant, and scale with clarity.