What are my older eBay early withdrawals being categorized as Product Sales?

The short answer is: eBay's API behaves a bit differently for Express Payouts older than 90 days and we've had to build a work-around to make the overall math work.

The long answer:

Background

When Seller Ledger connects to eBay, we access their API (application programming interface.) This is a service eBay provides that allows 3rd party developers to talk to their platform on behalf of sellers and access certain data.

How regular payouts work

The vast majority of the time, when you make sales on eBay, your eBay balance increases and when you have charges for fees and shipping labels, that balance will decrease. When it's time for eBay to send funds to you, they count up the running balance since your last payout and send that to you. Let's take a look at an example:

Let's imagine you have an eBay Payout of $15.50 from Feb 1, 2024

This payout was the result of the following transactions:

1. An order showing $21.50 that consisted of:

- Item ABC that sold for $20.00

- Plus shipping collected of $5.00

- Less a final value fees of -$3.50

2. An eBay Ad fee of $1.25

3. An eBay shipping label charge for $4.75

In Seller Ledger, you could click into your eBay account and see the order for $21.50 (with the ability to click to view the details underneath,) the ad fee of -$1.25 (because it is subtracted from your eBay balance,) and the shipping label fee of -$4.75. You would also see the payout show up as -$15.50 (a transfer out of your eBay managed payments account.)

The profit and loss statement impact of the details of this payout would be:

Income:

Product sales: $20.00

Shipping Collected: $5.00

Expenses:

Commissions & Fees: $4.75 ($3.50 final value fee plus $1.25 ad fee)

Shipping costs: $4.75)

Net income: $15.50

How express payouts work

Unfortunately, when you use express payouts, eBay's APIs (for transactions older than 90 days,) no longer provide the order and fee details under those payouts.

If you take the exact same payout as shown above, but change the date to Oct. 1, 2023, Seller Ledger would only receive 2 pieces of information from eBay:

1. A payout showing an amount of -$15.50
2. An "Early withdrawal" request in the amount of $15.50

Because we don't get the order details, the ad fee or the shipping expense, we have to make an assumption on how to treat the early withdrawal in terms of income and expense. Given that eBay payouts occur when you have positive earnings, we have chosen to categorize them as "Product sales."

Implications

There are 2 key implications of this approach:

1. We are still able to get your annual profit and loss for the business correct. Your next income for the year should still match the raw numbers eBay provides
2. Your profit and loss and Schedule-C will not match the 1099-Ks that get sent. However, there are a number of reasons why 1099-K amounts are inconsistent, a number of which we've researched here. But we believe, so long as your net profit from the business is accurate, you should be in good shape.

Final thoughts

If you have used Express Payouts and for any reason you are uncomfortable with this approach, we suggest that you not rely on older eBay data retrieved through Seller Ledger. All data moving forward will be just fine, but using the app for the prior year's taxes has this limitation.

If you signed up for an annual plan in order to get the prior tax year data and are not comfortable with this solution, we will be happy to refund you the money and delete the older data.