Guide · 7 min read

    Bookkeeping for Etsy sellers

    Etsy reports your gross sales to the IRS — but the gross number isn't what you keep. Here's how to track fees, materials, and shipping so you only pay tax on real profit.

    Why Etsy bookkeeping is different

    Most accounting advice assumes you invoice a client and get paid in full. Etsy is the opposite: Etsy collects payment, takes a stack of fees off the top, and deposits the leftovers. If you only record deposits, you're missing every fee you could deduct.

    The fees Etsy takes per order: $0.20 listing, 6.5% transaction, 3% + $0.25 payment processing, plus 12–15% if the sale came through Etsy's offsite ads. On a $25 order with $5 shipping, that's about $1.85–$6.35 in fees alone. See your exact fees here.

    The 4-step Etsy bookkeeping system

    1. 1

      Separate your money

      Open a free business checking account. In Etsy → Settings → Payment account, connect it as the deposit bank. Pay yourself by transfer; never run shop money through your personal account.

    2. 2

      Pull the monthly statement

      Etsy → Shop Manager → Finances → Monthly Statements gives you a CSV of every sale, fee, refund, and shipping label. Download it on the 1st of every month and never lose data again.

    3. 3

      Log cost of goods + supplies

      Every order has a true cost — materials, packaging, postage you paid (not the postage you charged). Track these as you ship, not at year-end.

    4. 4

      Reconcile and set taxes aside

      Monthly: confirm the Etsy deposits match what hit your bank. Quarterly: move 25–30% of profit to a separate savings account for federal + self-employment tax.

    Expense categories every Etsy shop needs

    Etsy listing & transaction fees
    Payment processing fees
    Offsite ads fees
    Etsy Plus / Etsy Pattern subscriptions
    Materials & raw inventory
    Packaging & shipping supplies
    Postage & shipping labels
    Equipment & tools
    Photography props & lighting
    Home studio (% of rent)
    Mileage to post office
    Software (Canva, design tools)

    Track Etsy fees automatically

    SnapBooks logs every Etsy payout, separates the fees, and shows your real profit per month.

    Start free

    Free tools for Etsy sellers

    Frequently asked questions

    Does Etsy track my income for taxes?+

    Etsy issues a 1099-K if you cross $5,000 in gross sales in 2024, $2,500 in 2025, and $600 in 2026+. But Etsy's 1099-K shows GROSS sales — including fees, shipping you collected, and refunds. You're responsible for deducting those expenses yourself. Bookkeeping is what lets you do that legally.

    Which Etsy fees can I deduct?+

    All of them. Listing fees ($0.20 each), transaction fees (6.5%), payment processing (3% + $0.25), offsite ads (12–15%), and Etsy Plus subscriptions are 100% deductible business expenses. Also materials, shipping supplies, packaging, postage, mileage to the post office, and a portion of your home if you have a dedicated work area.

    Do I need a separate bank account for my Etsy shop?+

    Yes. Connect a free business checking account to your Etsy Payments. The IRS expects business and personal money to be separated; mixing them is the fastest way to lose deductions in an audit.

    How often should I update my Etsy bookkeeping?+

    Weekly. Etsy fees are deducted from every payout — if you don't log them in real time, you'll undercount expenses and overpay tax. 15 minutes every Sunday is enough for most shops under 200 orders/month.

    What's the simplest bookkeeping setup for an Etsy shop?+

    One spreadsheet or app with three columns per order: gross sale, Etsy fees, cost of goods. Add monthly totals for supplies, shipping postage, and offsite ad fees. That's enough until you cross ~$50k in sales.