How to calculate my Shopify Cost of Goods Sold (COGS) on Taxomate

Calculate Shopify COGS and send to QuickBooks or Xero

Updated over a week ago

taxomate allows you to calculate the Cost of Goods Sold (COGS) for each payout period using an average cost method. We recommend reviewing this article to understand how taxomate's COGS system works for Shopify. Once you enable COGS (see below) a seperate Cost of Goods sold tab will appear within each payout.

STEP 1. Enable COGS

Head over to Settings > Account, select the Inventory tab and Enable COGS. You also have the option of enabling cost per country and grouping the invoice by SKU.

STEP 2. Mapping COGS Accounts

Similar to Payouts, we map COGS to accounts in QuickBooks or Xero. The total COGS amount (or per SKU) for each month is calculated and sent to QuickBooks or Xero.
If you scroll down on the Inventory settings, you will want to confirm the Asset and Expense accounts are correct.
πŸ‘‰ The below settings will reduce the amount in the Shopify Inventory account and increase the Shopify Cost of Goods Sold account.

ℹ️ You will want to assign all purchase orders for inventory (and other inventory costs) to the Shopify Inventory account (or whatever account you end up choosing as the asset account).

STEP 3. Enter Default Product Costs

You have the option to either enter your product costs in-line or in bulk.

OPTION A: In-Line Editing

First, select Default Costs in Settings > Default Costs.

πŸ‘‰ It is important each product and variation is assigned their own SKU. If no SKU is assigned to a product at the time an order is placed, Shopify will not provide us with any SKU and we will assign the product name as the SKU instead.

For each SKU you would like to calculate COGS, enter the average cost on the right side.

OPTION B: Bulk Editing

To bulk edit on the Default Costs page first select Download Sheet.

Enter the respective name (optional) and cost (required) for each SKU. Currency is not required and no formatting changes should be made. Save the CSV file and upload the file back into taxomate.
⚠️ ⚠️ Any changes made to default costs will only apply to payouts imported after these changes are made. To apply the default costs to a payout already imported, select the Apply Default Costs button (see Step 4 below)

STEP 4. COGS Payout Invoice

Each payout will now have a Cost of Goods Sold tab.
Before you send off your COGS invoices to QuickBooks or Xero, you can update the individual cost of a product for that specific payout (this will override Default Costs). Under the Cost column, select the edit button for the SKU that you would like to edit. Change the cost to the custom price for that month.
You can also select the Apply Default Costs button to apply the average costs you entered in Settings > Default Costs.

Default costs can also be applied in bulk by selecting the payouts you would like to update, the three dots on the top toolbar and the Apply Default Costs button.


STEP 5. Sending COGS Invoice

Once you are ready to send the invoice, on the top right corner of each COGS invoice select Send to QuickBooks or Xero.

You can also send the COGS Invoices in bulk by selecting the payouts you would like to send and then "Send COGS Invoices" by selecting the three dots in the top right corner.

STEP 6 (optional): Automate COGS Invoices

taxomate can automatically send COGS invoices to your accounting software when new Shopify payouts are imported into taxomate.
Go to Settings > Inventory and select Auto Send COGS Invoice.

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