Introduction
Selling wholesale on Shopify in 2025? Great margins, repeat buyers—but your tax exposure can multiply fast if you’re not tracking correctly.
Proven Tip:
Track inventory by customer type, verify resale certificates, and set up proper COGS tracking from day one.
Proven Tip: Track Inventory, COGS, and Sales by Customer Type
Wholesale sellers often:
- Underreport income by not separating retail vs. wholesale sales
- Fail to verify buyer resale certificates (leading to sales tax problems)
- Miss tax deductions for shipping, packaging, and returns
Use Shopify apps or your accounting software to separate:
- B2B vs. DTC orders
- Inventory sold per segment
- Discounts given to wholesale buyers
- Fulfillment costs tied to larger B2B shipments
IRC Tax Code Relevance
Key tax codes relevant for wholesale operations on Shopify:
- IRC §162 Deduct ordinary and necessary business expenses, including wholesale-specific costs (freight, warehouse, packaging)
- IRC §263A Capitalization rules for inventory and shipping into COGS
- IRC §6001 Requires proper documentation and recordkeeping for IRS audits
- IRC §471 Inventory valuation methods—crucial for accurate profit reporting
Relevant IRS Forms
| Form | Purpose |
|---|---|
| Form 1125-A | Calculate and report Cost of Goods Sold |
| Schedule C / Form 1065 / 1120-S | Report business income, expenses, and net profit |
| Form 4562 | Deduct business assets (printers, packaging machines, etc.) |
| Form 1099-NEC | Report payments to third-party vendors, agents, or contractors |
| Form 8300 | Report cash payments over $10,000 (if applicable in B2B deals) |
Example: Shopify Seller Saved $12,000 After Fixing Tax Setup
A Shopify-based electronics wholesaler used to lump all revenue under “sales” and didn’t validate reseller certificates. In 2024, a sales tax audit resulted in back taxes owed in two states.
In 2025, the seller:
- Verified every wholesale customer’s resale certificate
- Set up tax-exempt status in Shopify B2B profiles
- Implemented detailed inventory tracking for wholesale COGS
- Segregated direct-to-consumer and B2B income
Result: They saved $12,000 in overpaid taxes and avoided future penalties.
Step-by-Step Tax Checklist for Shopify Wholesale Sellers
Step 1: Separate B2B and DTC Sales in Shopify
Use Shopify’s B2B features or tags to segment orders.
Step 2: Collect and Verify Resale Certificates
For every wholesale customer claiming tax exemption, request and keep their certificate on file.
Step 3: Track Inventory Movement and COGS
Use QuickBooks, Xero, or inventory software to monitor what you sold, to whom, and at what cost.
Step 4: Deduct Shipping and Freight Costs
Large wholesale shipments come with heavy logistics costs. Track and deduct them under IRC §162.
Step 5: Prepare Clean IRS Filings
Report COGS on Form 1125-A, track contractor payments on Form 1099-NEC, and deduct assets via Form 4562 if you upgraded warehouse tools.
Conclusion
Wholesale sellers can’t afford sloppy tax records. In 2025, the IRS—and your bottom line—expect clarity. Split your sales channels, document everything, and keep your inventory and COGS bulletproof.
Call to Action
Selling wholesale on Shopify and need tax cleanup, COGS setup, or reseller compliance?
Email Anshul Goyal, CPA EA FCA at anshul@kkca.io to book a tax review and protect your profits.
Disclaimer
This article is for informational purposes only and should not be considered tax or legal advice. Please consult with a licensed CPA or attorney for your specific situation.
FAQs
1. Do I need to charge sales tax to wholesale buyers?
Only if they don’t provide valid resale certificates. Always verify and keep on file.
2. Can I deduct freight and packaging costs?
Yes. Freight, returns, and fulfillment costs are fully deductible under IRC §162.
3. What happens if I mix DTC and wholesale revenue?
You risk underreporting taxes, overpaying on retail income, and failing audits.
4. Do I need a special license to sell wholesale?
Some states require a seller’s permit or wholesale license. Check your local laws.
5. What’s the best tool to track wholesale COGS?
QuickBooks Online with inventory add-ons or Xero with DEAR Inventory work well.
About Our CPA
Anshul Goyal, CPA EA FCA, is a U.S.-licensed Certified Public Accountant and IRS Enrolled Agent. He helps Shopify sellers set up tax-smart systems for wholesale, track inventory, and avoid costly penalties with clean documentation and reporting.
To schedule your Shopify tax consultation, contact anshul@kkca.io.