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How to Set Up and Record Shopify Marketplace-Collected Tax in Webgility Online

This article helps users in understanding how Webgility Online handles Shopify marketplace-collected tax for orders placed through the Shop app. With Shopify now deducting and remitting marketplace sales tax directly, Webgility Online ensures that users’ accounting records reflect these deductions accurately. By automatically identifying affected orders and adjusting tax liability and clearing account balances, Webgility Online prevents overstated tax amounts and ensures accurate bank reconciliation—whether the user follows Summary Posting or Transactional Posting workflows.

Note1: This feature is available to all existing and new Webgility Online users who use Shopify with QuickBooks Online.

Overview

Starting January 2025, all orders placed through the Shop app on Shopify are subject to Shopify’s marketplace facilitator tax handling. This means:

  • Shopify deducts marketplace sales taxes directly from the payout,
  • Shopify remits these taxes to the tax agencies,
  • The deducted amount appears clearly in the Shopify payout report.

For more information, refer to Shopify’s documentation: “Shop app sales tax handling”.

To ensure accurate accounting and proper bank reconciliation, Webgility Online now automatically detects these orders and adjusts your records appropriately—whether you use Summary Posting or Transactional Posting.

How Webgility Online Handles Marketplace-Collected Tax

Whenever Webgility Online identifies Shop-app orders with marketplace tax deductions, it will:

  • Remove this tax amount from your sales tax liability, since Shopify will remit this.
  • Remove this amount from the clearing account balance, as it is not included in the payout.

These adjustments prevent overstated tax liability and maintain accurate bank reconciliation.

Handling varies depending on your post-to-accounting method: Summary Posting or Transactional Posting.

Summary Posting

For summary posting, Webgility Online adjusts your payout journal entry to include marketplace-collected tax amounts.

How it Works

  1. Webgility Online identifies the net marketplace sales tax debited or credited by Shopify in each payout.
  2. Webgility Online adds additional lines to your payout summary journal entry:
    • If the net amount is negative (indicating Shopify deducted and remitted tax):
       Webgility Online debits the account selected to record 'Sales Tax collected'.
    • If the net amount is positive (indicating Shopify issued a tax refund):
       Webgility Online credits the account selected to record 'Sales Tax collected'.

Sample Summary Journal Entry

This ensures accurate bank reconciliation and marketplace-collected tax does not remain on your own tax liability.

Transactional Posting

Due to QuickBooks Online limitations, transactional posting requires a different method of adjusting for marketplace-collected tax.

Configuring Marketplace Tax Settings in Webgility Online


Note: These settings are only available for transactional posting

Steps to Configure

  1. Go to:
    Sync Settings → Sales Tax

  1. Turn ON/OFF the toggle:
    “Exclude marketplace-collected tax from my tax payable”
    • ON (Recommended)
      Note: will be marked ON by default for all customers
      • Webgility Online manages marketplace tax adjustments automatically.
      • When Webgility Online posts an order that includes marketplace tax:
        • Webgility Online removes the marketplace-collected tax amount from the order’s sales tax.
        • Webgility Online adds a non-inventory item called “Marketplace Tax Adjustment”
           (Created automatically the first time such an order is posted).
        • The removed marketplace tax amount gets allocated to this non-inventory item.
      • This adjustment item posts to a newly created liability account:
        Marketplace Withheld Tax Clearing. (The user can change this account in settings if needed.)
      • All marketplace tax amounts are routed to the Marketplace Withheld Tax Clearing account, when orders are posted.
      • Select your own liability account if desired—otherwise, Webgility will create one automatically the first time such an order is posted.

Note2: If you change the selected account after the Marketplace Withheld Tax Clearing account already holds a balance, you must manually clear that balance after the next payout reconciliation.

  • OFF (Not Recommended)
    • Marketplace tax will be treated as your tax payable, which will:
      • Overstate your sales tax liability
      • Cause bank reconciliation issues
    • Webgility Online will not create the clearing account or adjustment item.

How it Works

  1. When Webgility Online posts an order that includes marketplace tax:
    • Webgility Online removes the marketplace-collected tax amount from the order’s sales tax and allocates it to the selected/newly created marketplace tax liability account (through the addition of a non-inventory item called “Marketplace Tax Adjustment”).
    • The marketplace tax liability account will keep accumulating the marketplace tax amount over a payout period. 
  2. When the corresponding Shopify payout is received, Webgility Online posts a clearing journal entry that:
    • Deducts the marketplace-collected tax from the Order Deposit Account (selected in Sync Settings>Orders), and
    • Reduces the Marketplace Withheld Tax Clearing account back to zero.

Sample Clearing Journal Entry

Result

  • Your sales tax liability remains accurate.
  • Your Order Deposit account balance matches the received net payout amount.
  • The Marketplace Withheld Tax Clearing account resets to zero with every payout.

Availability

This feature is available to all existing and new Webgility Online users who use Shopify with QuickBooks Online.