Most ecommerce sellers I’ve talked to this spring started 2026 by booking tariffs as an operating expense. It’s an honest mistake. The tariff line item shows up on a customs broker invoice, gets paid out of operating cash, and the bookkeeper plugs it into the closest expense category they can find. Often that’s “Duties and Fees” or worse, just lumped into Cost of Goods Sold the moment it hits the bank.
That treatment is wrong under GAAP. It’s also wrong under the IRS rules for inventory accounting if you carry stock. After a year of escalating duties, the way your books handle tariffs is no longer a rounding error. It’s the difference between a clean lender package and one that gets bounced back for restatement.
The GAAP rule, in plain English
Tariffs paid to import goods are part of the cost of putting that inventory in a condition and location to be sold. ASC 330 is direct on this. Duties get capitalized into inventory and flow into cost of goods sold when the unit sells. Not when the duty is paid. Not at month-end. Not when you feel like it.
For a seller who imports 2,000 units a month and pays $1.50 per unit in duties, that’s $3,000 a month sitting in inventory until the units actually move. If you expense it on payment, you understate inventory by $3,000 and overstate COGS by the same amount. Your gross margin looks worse than it is, and your balance sheet looks weaker than it is.
That’s not just an accounting issue. It’s the reason your lender keeps asking why your inventory turns look so high, or why your gross margin dipped four points without a price change.
What actually counts as landed cost
Landed cost is the full price of getting one sellable unit to your warehouse door. For ecommerce that means:
- The product cost from the supplier
- Inbound freight, including ocean and last-mile to your fulfillment center
- Customs duties at the regular HTSUS rate
- Section 301 tariffs where applicable
- Section 232 tariffs where applicable
- The 10 percent Section 122 surcharge that took effect February 24, 2026
- Insurance and customs broker fees
- Any handling or repackaging done before the unit becomes saleable
Marketing fees, Amazon storage fees, and 3PL pick-and-pack fees are not landed cost. They’re period costs or, in some cases, part of fulfillment expense. Don’t roll them into inventory.
The Section 122 surcharge problem
This is where most sellers get tripped up. The 10 percent Section 122 surcharge is broad. It’s hitting goods from countries that previously weren’t on anyone’s tariff radar. If your supplier is in Vietnam, Cambodia, or Mexico, you may now have a duty obligation you didn’t have at the start of 2025.
Your accounting system needs to track tariffs at the SKU and country-of-origin level. If you’re using a generic chart of accounts with one Customs Duties expense line, you’re flying blind on which products are actually profitable now versus which ones are quietly losing money on every order.
The cleanest setup is a sub-account structure under inventory: regular duty, Section 301, Section 232, Section 122 surcharge. Map each to the supplier or country. Most QuickBooks and Xero implementations can handle this with class tracking or a third-party landed cost app. If you’re on cash basis with no inventory tracking, this is the year you outgrow that setup.
What to do about the IEEPA refund question
The Supreme Court ruled in February 2026 that IEEPA doesn’t authorize tariffs. That opens the door to refunds for duties paid under the IEEPA framework. Sellers want to know if they can book the refund as a receivable.
Under ASC 450, a tariff refund is a gain contingency. You don’t book it until it’s realized or virtually certain. “We think we have a case” doesn’t qualify. Neither does “our customs broker says we’ll get something back.” Wait until you have a refund check or a formal CBP determination. Until then, disclose it in the footnotes if you’re producing reviewed financials, but don’t put it on the balance sheet.
If you do eventually receive a refund, the tax treatment depends on whether the underlying duty was already deducted (or sat in inventory and got sold). Most ecommerce sellers will have already pushed the duty into COGS through sold inventory. The refund then runs through other income, not a reduction of COGS. Your CPA will want to see the full timeline before booking.
When tariffs trigger an inventory writedown
GAAP requires inventory at the lower of cost or net realizable value. If you’ve layered $4 of new duty onto a SKU that retails for $19.99 and Amazon’s competition still sells the same product for $17.99, your cost may now exceed NRV. That’s a writedown.
Most ecommerce sellers don’t do this analysis until tax season. By then it’s too late to plan around it. The right move is a quarterly NRV check on your top 25 SKUs by inventory value. If a SKU is showing negative contribution margin after the tariff increase, you have three options: raise the price, eat the writedown, or stop importing it.
What this changes for lenders and buyers
If you’re talking to a bank, an SBA lender, or a buyer in 2026, they will ask how you’re accounting for tariffs. The good ones will. Have an answer. Show them the landed cost build-up, the country-of-origin tracking, and the NRV testing. The brands that get rate breaks and clean term sheets are the ones who can show that they understand the cost stack.
The brands that struggle are the ones whose books make tariffs look like a one-time expense surge. That story doesn’t hold up when revenue and gross margin tell different stories than the underlying unit economics.
If your books still treat duties as a period expense, fix it before Q2 close. The journal entries to reclassify are not complicated. The conversation with your lender or your buyer if you wait is.
