The eCommerce Tax Savings Checklist

S corporation election and reasonable salary

Above a certain profit level, a pass-through owner can reduce self-employment tax by taking a defensible salary and receiving the remaining profit as distributions. Setting that salary is the whole game — too low invites IRS attention, too high overpays payroll tax for no reason.

Re-evaluating the entity as you grow

The structure that made sense at $200K of profit is often wrong at $2M. Reinvestment plans, state footprint, investor conversations, and exit timelines all move the answer between LLC, S corp, and C corp — and switching has tax consequences worth modeling before you act.

Protecting the qualified business income deduction

The pass-through deduction phases out and interacts with wages, entity type, and taxable income. Owners near the thresholds can often preserve it with deliberate decisions about salary, retirement contributions, and timing.

Getting COGS and inventory right

Shrinkage, landed costs, and dead stock write-downs all change taxable income. If the inventory number on the balance sheet is wrong, the tax return is wrong — usually in the government's favor.

Accelerated depreciation and cost segregation

Equipment, vehicles, warehouse build-outs, and purchased buildings can often be deducted far faster than the default schedules. On a building purchase, a cost segregation study frequently pulls years of deductions forward into the years you need them.

Timing income and expenses deliberately

Accounting method elections, prepaid expenses, and year-end purchasing decisions move income between years that may be taxed at very different rates. This only works when it happens before December 31 — which is why planning beats filing.

The R&D credit

Product formulation, packaging engineering, manufacturing process work, and in-house software development can all qualify. Brands developing their own products routinely leave this credit unclaimed for years.

Hiring and energy credits

Credits for hiring from targeted groups and for certain vehicle and energy purchases come and go with legislation. A planning cadence is what catches them while they still apply to you.

Owner retirement plans

Solo 401(k)s, SEP IRAs, and — in strong profit years — cash balance plans create large current deductions while building wealth outside the business. Plan type and timing decide how much room you actually get.

Family on payroll, done properly

Legitimately employing your kids or spouse shifts income into lower brackets and can fund their retirement accounts. The word that matters is legitimately: real work, real rates, real documentation.

Accountable plans and the Augusta rule

An accountable plan reimburses owners tax-free for business use of personal assets, including a home office. The Augusta rule lets the business rent your home for genuine business events a limited number of days per year — deductible to the company, tax-free to you when the requirements are met.

State income tax exposure and P.L. 86-272

The federal protection that once kept out-of-state sellers safe from state income tax is eroding fast. Where your inventory sits and how your website behaves now determine which states can tax you.

Pass-through entity tax elections

Most states now let a pass-through business pay state income tax at the entity level, restoring a federal deduction the SALT cap otherwise takes away from the owner. It is close to free money — but the election windows and mechanics differ by state.

Cross-border structuring

Foreign-owned sellers and US brands expanding abroad face their own layer: withholding, treaty positions, reporting like Form 5472, and structuring choices that are expensive to unwind later.

Structuring years ahead of a sale

Qualified small business stock eligibility, asset versus stock sale framing, installment timing, and even state residency are decisions with multi-year clocks on them. For businesses that use our Exit Planning, savings can shift from five figures all the way up to seven.