PiggyShopify Seller Taxes (2026)
Shopify stores look simple until inventory timing, payment-processor 1099-Ks and quarterly estimates show up in the same April. Profit is not your payout — it is sales minus COGS and fees.
What you owe
If you sell as a sole proprietor or disregarded single-member LLC, Shopify profit is Schedule C business income. Once net profit reaches $400 you also owe self-employment tax (15.3% on 92.35% of profit; Social Security up to the $184,500 wage base). Federal income tax is separate. A 1099-K does not create taxability — and missing one does not erase it.
Profit is sales minus COGS and fees
Start from sales, subtract cost of goods sold (inventory when sold — not everything you bought), Shopify subscription and transaction fees, payment-processor fees, ads, shipping supplies and other ordinary expenses. The remainder is the base for income tax and SE tax.
1099-K vs what hit your bank
Card processors and marketplaces may issue a 1099-K that reports gross payment volume. Refunds, chargebacks and some fees can make Box 1 larger than cash you kept. Reconcile line by line; do not ignore a 1099-K that “looks wrong,” and do not skip income if no form arrives.
Check thresholds with the 1099-K threshold checker — federal and some state rules differ. Compare with Etsy seller taxes if you sell on both channels.
Inventory timing matters
Materials and finished goods you still hold are generally inventory, not an immediate deduction. What usually reduces taxable profit in a year is the cost of what you actually sold (COGS), plus ordinary operating expenses. December stock-ups do not automatically create December deductions.
Sales tax is a different system
Collecting sales tax for customers/states is not the same as income or SE tax on your profit. Keep sales-tax collections out of “owner profit” when you estimate set-asides for the IRS — then run net profit through the calculators below.
What this looks like in numbers
| Gross sales | COGS + fees | Net profit | Federal SE tax |
|---|---|---|---|
| $40,000 | $22,000 | $18,000 | $2,543.32 |
| $90,000 | $52,000 | $38,000 | $5,369.23 |
| $150,000 | $95,000 | $55,000 | $7,771.25 |
SE tax only. Use the Freelancer Tax Calculator for federal + state + QBI in one pass.
Quarterly payments
Inventory-heavy sellers often have lumpy cash flow. Use safe harbor or Form 2210 annualization when Q4 is huge and Q1 was quiet — see the Form 2210 helper and safe harbor calculator.
PiggyMath is not affiliated with Shopify. Shopify® is a trademark of its owner. Independent educational guide — we help you prep and set aside; we do not e-file.
Mini calculator (2026)
Estimate 2026 SE tax on seller profit after COGS and platform fees. Keep collected sales tax out of these boxes. Educational estimate — not tax advice; we do not e-file.
Your numbers
Open full tools with these numbers: Self-employment tax calculator · Quarterly tax calculator · Mileage deduction
Run your own numbers
- Freelancer Tax Calculator — federal SE + income tax, optional state and QBI.
- Self-Employment Tax Calculator — the 15.3%, exactly.
- Quarterly Tax Calculator — what to send the IRS each quarter.
- Tax Set-Aside Calculator — what percent of net profit to park.
- Filing Prep Checklist — documents and forms before you file (we do not e-file).
- Mileage Deduction Calculator — when driving is part of the gig.
Frequently asked questions
Is Shopify sales income self-employment income?
Yes if you are a sole proprietor or single-member LLC disregarded for tax. Sales go on Schedule C after cost of goods sold and fees.
Why is my 1099-K higher than payouts?
Payment processors often report gross transactions before refunds, chargebacks and some fees. Reconcile the form to your Shopify and processor reports.
Do I need sales tax and income tax?
Often yes — sales tax is collected for customers/states; income and SE tax are on your profit. They are different systems.
Is PiggyMath affiliated with Shopify?
No. PiggyMath is an independent educational site and does not e-file returns.