# Xero

> Cloud accounting with bank feeds, invoicing and receipt capture.

- Accounting, Best value
- Platforms: eBay, Vinted, Etsy, Depop, TikTok Shop, Whatnot
- Orders a week: 0–2000
- Not yet checked by a person

Suits you once your shop has inventory, invoices and maybe a helper. It pulls details from receipts you photograph, and your accountant can see the books live.

## Shops with inventory, invoices and staff ahead

You buy inventory in bulk, you may pay a helper, and you collect sales tax on your own site or at markets. Xero is cloud accounting with bank feeds and invoicing, and it has reports your accountant can read.

Xero suits you once you keep inventory records. With a few sales a month and no inventory records, you would pay for features you would not use.

If you buy inventory in bulk, such as liquidation pallets or wholesale cases, you need to see margin per line as well as total sales.

## Bank feeds, receipts and sales tax

Xero imports transactions from your business account, and you match each one to a sale, a fee or a purchase. Receipt capture lets you photograph a receipt and attach it to the cost.

Marketplaces such as eBay, Etsy and Poshmark collect sales tax for you in most states; Xero tracks the sales tax you collect yourself. Plans differ in what they include, so compare them on Xero's US site.

## Categories and a weekly reconcile

Connect your business bank account and your PayPal or marketplace payout accounts so payouts and fees come in automatically. Set up categories for inventory, shipping, packaging and platform fees.

Spend ten minutes a week reconciling. Photograph receipts for mailers, labels and inventory as you buy them so you have every one by tax time.

Give your accountant access to your Xero file before year end. They can review your categories during the year, which cuts the time they spend on your return.

## QuickBooks or a spreadsheet

QuickBooks covers similar ground and is the package most US tax preparers know; its solo plans also estimate quarterly taxes. Pick it if your preparer prefers it.

With a few sales a month, a spreadsheet and each marketplace's annual report cover simple books for free. Move to Xero once you hold inventory and invoice customers.

For an LLC taxed as an S corp, or with payroll, Xero and QuickBooks both handle the extra bookkeeping.

## Form 1099-K and quarterly taxes

Marketplaces and payment apps send you a Form 1099-K once your payments pass the federal reporting threshold, and the IRS gets a copy. The figure is gross, so your books need to show the fees, refunds and cost of goods behind it; irs.gov has the current threshold.

If you expect to owe tax on your profit, the IRS expects estimated payments through the year. If you keep your books current in Xero, you can check each quarterly figure quickly.

## Common mistakes

- Open a separate business account. Mixing personal and business spending slows reconciling.
- If you record a payout as income without its fees, you understate your costs. Record the gross sale and the fee separately.
- Reconcile weekly. A year-end backlog takes far longer than ten minutes a week.
- Some plans cap invoices or bills each month, so compare plan limits before you choose.

## Guides

- [Hobby or business? Schedule C for home resellers](https://sellersetups.com/us/guides/hobby-or-business-resellers): The IRS factors that separate a selling hobby from a business, why the answer changes what you can deduct, and the $400 self-employment tax line.

## Questions

### Does Xero file my taxes?

No. Xero keeps the books, and you or your preparer file the return using its reports.

### Do I need Xero as a small seller?

Not at low volume. A spreadsheet covers simple books. Choose Xero once you hold inventory and invoice customers.

### Can it handle marketplace fees?

Record each payout with its fees as separate lines, or use a connector app that splits them.

### How much does Xero cost?

Xero sells monthly plans at different prices. Check current prices on Xero's US site.

### Can my accountant use my Xero file?

Yes. Invite your accountant as a user and they work in the same records you keep.