--- title: "How do I deal with QuickBooks PayPal payments with Shopify?" description: "How to reconcile PayPal deposits for Shopify payouts in QuickBooks with a clearing account and bank rules." url: https://docs.taxomate.com/en/articles/6888847-how-do-i-deal-with-quickbooks-paypal-payments-with-shopify collection: "Payment Processors" updated: 2026-10-20 language: en --- # How do I deal with QuickBooks PayPal payments with Shopify? How to reconcile PayPal deposits for Shopify payouts in QuickBooks with a clearing account and bank rules. **Step 1: Connect Your PayPal Account to QuickBooks Online** 1️⃣ **Access QuickBooks Apps:** - Log in to your **QuickBooks Online** account. - Navigate to the **"Apps"** section. 2️⃣ **Find PayPal App:** - Search for **"PayPal"** in the App Store. - Select **"PayPal Connector"** by QuickBooks. 3️⃣ **Install and Authorize:** - Click **"Get App Now"** and follow the prompts to install. - Authorize the connection by logging into your **PayPal** account when prompted. **Step 2: Configure Taxomate to Use a PayPal Clearing Account** 1️⃣ **Set Up a Clearing Account in QuickBooks:** - Go to **"Accounting"** > **"Chart of Accounts."** - Click **"New"** to create a new account. - Choose **"Bank"** as the account type. - Name the account **"PayPal Clearing Account"** (or a preferred name). 2️⃣ **Map PayPal Transactions in Taxomate:** - Log in to **Taxomate.** - Navigate to the **Accounts and taxes** page. - Locate the **"Gateway Transactions"** category. - Map PayPal transactions to the **PayPal Clearing Account** you created. **Step 3: Create a Bank Rule in QuickBooks Online** 1️⃣ **Access Bank Rules:** - In QuickBooks Online, go to **"Banking."** - Select **"Rules."** 2️⃣ **Create a New Rule:** - Click **"New Rule."** - Name it **"PayPal Sales to Clearing."** - Set the rule to apply to **"Money In"** transactions. - Choose the **PayPal bank account** to apply the rule. 3️⃣ **Set Conditions:** - Under **"Conditions,"** specify that **"Bank Text"** contains **"PayPal"** to capture relevant transactions. 4️⃣ **Define Actions:** - Set **"Transaction Type"** to **"Deposit."** - Assign the deposit to the **"PayPal Clearing Account."** 5️⃣ **Save the Rule:** - Ensure all details are correct. - ✅ Save the rule to automate the categorization of future PayPal deposits. **Step 4: Create a Bank Rule for PayPal Fees** Since **PayPal Connect now separates fees automatically**, you **do not** need to manually record fees via journal entries. Instead, create a **bank rule** just like for sales. 1️⃣ **Create a New Rule for Fees:** - Click **"New Rule."** - Name it **"PayPal Fees to Expense."** - Set the rule to apply to **"Money Out"** transactions. - Choose the **PayPal bank account** to apply the rule. 2️⃣ **Set Conditions:** - Under **"Conditions,"** specify that **"Bank Text"** contains **"PayPal Fee"** to capture fee transactions. 3️⃣ **Define Actions:** - Set **"Transaction Type"** to **"Expense."** - Assign the transaction to the **"PayPal Fees"** expense account (create an expense account if you have not already created it). 4️⃣ **Save the Rule:** - Ensure all details are correct. - Save the rule to automate PayPal fee categorization. ## OLD Method (Before PayPal Connect Was Available) ### How does it work? Taxomate sends PayPal payouts that include an amount allocated to the Gateway Clearing account. This amount will not include any PayPal Fees since we are unable to import this information from Shopify. After you connect your PayPal bank account you will see that deposit amount is net of fees. These deposits will be allocated to the Gateway Clearing account. At the end of each month you will need to create a journal entry to account for any PayPal fees. **STEP 1. Connect PayPal to QuickBooks** Make sure you have connected your PayPal account to QuickBooks Online. You can add PayPal as an app in your QuickBooks account [here](https://quickbooks.intuit.com/app/apps/appdetails/paypalconnect/en-us/). **STEP 2. Allocate PayPal Payments to Clearing Account** When you send a PayPal payout from Taxomate to QuickBooks, the deposit amount is allocated to the Shopify Clearing Account we set up during Quick Setup for external gateways. These total amounts will \_match\_ the payments received for each order in your PayPal account. **In order to reconcile the payouts you will want to allocate any Shopify deposits in the PayPal account in QuickBooks to the Shopify Clearing Account.** \_Note\_: Alternatively you can create your own clearing account in QuickBooks and map it to PayPal payments on the **Accounts and taxes** page in Taxomate (under the **Gateway Transactions** transaction category). **STEP 3. Create Bank Rule in QuickBooks** We recommend setting a [bank rule](https://app.qbo.intuit.com/app/olbrules) in QuickBooks that would automatically categorize any payments received in PayPal to the Shopify Clearing Account. You would then approve any deposits applicable to Shopify. See the rule we created below as an example: ![QuickBooks Create rule window for PayPal deposits to the Shopify clearing account](https://staticfiles.gleap.io/helpcenter/68a7b1342e2424396e93973d/20250822192117_0876.png) **STEP 4. Run Monthly Report in PayPal for PayPal Fees** Since the payout data we receive from Shopify does not include PayPal fees you will need to enter any PayPal fees on a monthly basis. First, go to Activity > All Reports and then select Activity Download. ![PayPal Activity menu with All Reports highlighted](https://staticfiles.gleap.io/helpcenter/68a7b1342e2424396e93973d/20250822192117_6154.png) Select the particular month / date range and then Create Report. Download the report when it is ready. ![PayPal Activity report page with the Create Report button](https://staticfiles.gleap.io/helpcenter/68a7b1342e2424396e93973d/20250822192117_9865.png) After you download the report, calculate the total amount of PayPal fees you had for the month. **STEP 5: Allocate PayPal Fees using Journal Entry in QuickBooks** If you haven't already, create an expense account in QuickBooks named PayPal Fees. Create a journal entry and debit the PayPal Fees account and credit the Shopify Clearing account using the total amount of fees you calculated for the month.