Online sellers receive net payouts from platforms, hold inventory with third-party logistics providers, accept returns at volume, and may owe sales tax in states where they have no physical presence.
Whether the seller is principal or agent — for example in marketplace or drop-shipping arrangements — determines whether revenue is reported gross or net of the platform’s share.
ASC 606-10-55-36 to 55-40
Expected returns reduce revenue through a refund liability, with an asset for the right to recover goods.
ASC 606-10-55-22 to 55-29
Inventory at third-party warehouses and fulfilment centers remains the seller’s and is measured at the lower of cost and net realizable value.
ASC 330
A business meeting the gross-receipts test may account for inventory as non-incidental materials and supplies or conform to its books, and is exempt from uniform capitalization.
IRC §471(c); §263A(i); §448(c)
Form 1099-K totals rarely equal booked revenue because of refunds, fees, chargebacks and timing; the reporting threshold was restored to $20,000 and 200 transactions.
IRC §6050W(e) (as amended by P.L. 119-21)
States may require collection on remote sales above economic thresholds. Marketplace facilitators collect on their own channels; direct-site sales remain the seller’s responsibility.
South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018)
Freight-in, packaging and fulfilment costs are reported in cost of goods sold, not in other deductions.
Form 1125-A instructions
The differences between the two are Schedule M-1 adjustments.
And they are where examinations tend to look first.
Each industry has a knowledge pack that sits in the stable, cached part of every prompt, so most of its cost is incurred once per return rather than on every round. Knowledge packs are in development.
Revenue and earnings multiples; inventory at the lower of cost and net realizable value in the asset approach.
Stated as at November 2026 for general information only; not tax, legal or accounting advice. Rules change and their application depends on facts. NGTAX.AI currently prepares Form 1120 only; other forms listed are identified for the reviewing professional and may not yet be prepared by NGTAX.AI. See the disclaimer.
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