Sales tax reconciliation is the monthly check that the tax your client collected matches its general ledger and each state return, state by state. For e-commerce clients, it also means separating the sales a marketplace taxed on the seller's behalf from the sales the seller has to report and pay itself.
This guide sets out a sales tax reconciliation workflow a CPA firm can run every month for online sellers registered in several states. It covers the data to collect, a worked example mapped to Texas return lines, the exception review before filing, and recent rule updates that affect the numbers.
Since the Supreme Court decided South Dakota v. Wayfair on June 21, 2018, a seller can owe sales tax in a state where it has no office or warehouse. The South Dakota law upheld in that case reached sellers that deliver more than $100,000 of goods or services into the State or engage in 200 or more separate transactions there each year, and the Court held that the earlier physical presence cases "should be, and now are, overruled." States then adopted their own thresholds, which a firm should track per client using a current reference such as our guide to economic nexus thresholds by state.
The practical result for a CPA firm is volume. One Shopify store that also sells on Amazon and Walmart can be registered in a dozen states, each with its own filing frequency, due date and portal login. When the monthly work is rebuilt from scratch each period, small differences between the platform reports and the books go unnoticed until a notice arrives. A written reconciliation routine keeps those differences visible and gives the reviewer a consistent file to sign off.
Nexus and taxability conclusions stay with the firm's qualified reviewers. The workflow below assumes those decisions have already been made and documented, and it focuses on the recurring compliance cycle.
Pull a sales tax report, by state, from each place the client sells: its own storefront, each marketplace, any point of sale system used at events or a retail location, and wholesale invoices raised in the accounting software. Each report should show gross sales, exempt sales, taxable sales, tax collected and refunds for the period, split by state.
Payment processor and marketplace payouts are net figures, so they are a poor starting point. Begin with the gross order data and work toward the deposit. For Amazon sellers, the order level detail and settlement reports usually need to be matched first, a process covered in our piece on outsourced bookkeeping for Amazon FBA sellers.
Most states require marketplace facilitators to collect and remit tax on the sales they process for third party sellers. Texas, for example, states plainly that the marketplace providers are responsible for collecting and remitting tax on sales made through a marketplace. The seller remains responsible for tax on its own storefront and other direct sales.
Marketplace sales still matter for the reconciliation. Texas requires marketplace sales to be included in Total Texas Sales on the return, while excluding them from Taxable Sales when the provider has certified that it will collect and remit. The same Texas guidance says a remote seller must count marketplace sales toward the state's $500,000 safe harbor calculation. Keep a copy of each marketplace's certification in the client file, and record marketplace tax in a separate column so it never posts to the client's sales tax payable account.
Compare the platform totals with the books for each state:
Separate payable sub-accounts by state make this far easier than one combined liability account. If the client posts net marketplace payouts as a single revenue line, gross up the entry first so the fees and the facilitator tax appear on their own lines. Our article on return reserves, chargebacks and sales tax reconciliation explains how refunds and chargebacks flow through these accounts.
Each client needs a calendar by state showing registration number, filing frequency, due date, portal access, payment method and the preparer and reviewer for that return. Filing frequency is assigned by each state and can change, so record the date and source of any change notice. Texas, for example, sets monthly returns as due on the 20th of the month after the reporting month, with quarterly returns due on April 20, July 20, October 20 and January 20, and it moves a due date falling on a weekend or legal holiday to the next working day.
For each state return, build one workpaper that ties the return lines back to the reconciled figures: total sales, exempt sales by reason, marketplace sales, taxable sales, tax due and any local jurisdiction detail the form needs. Rate and sourcing rules decide which local jurisdiction gets the tax, and our explainer on destination-based and origin-based sourcing rules sets out how states assign it.
The reviewer signs off on the exception list (see below) before anything is filed. After filing, save the return, the payment confirmation and the workpaper in the same folder structure for every client and period, so an auditor or a new staff member can find them without asking.
The figures below are illustrative. A client sells into Texas through its own Shopify store and through Amazon. For the month, the Shopify sales tax report shows $48,000 of Texas sales, of which $3,000 are exempt sales to a reseller with a valid Texas resale certificate on file. The client refunded one $1,000 taxable order during the month. Amazon processed $30,000 of Texas sales and collected the tax as marketplace provider. We assume a combined state and local rate of 8.25% for every Shopify order.
| Line | Shopify (seller collects) | Amazon (marketplace collects) | Return or ledger use |
|---|---|---|---|
| Gross Texas sales | $48,000.00 | $30,000.00 | |
| Less refunds | ($1,000.00) | $0.00 | |
| Net Texas sales | $47,000.00 | $30,000.00 | Total Texas Sales: $77,000.00 |
| Exempt sales (resale) | ($3,000.00) | n/a | Supported by certificate |
| Marketplace sales excluded | n/a | ($30,000.00) | Excluded from taxable sales |
| Taxable sales | $44,000.00 | $0.00 | Taxable Sales: $44,000.00 |
| Tax at 8.25% | $3,630.00 | $0.00 | Tax due on return: $3,630.00 |
The ledger shows $3,712.50 in the Texas sales tax payable account for the month, which is the tax on $45,000 of taxable sales before the refund. The difference of $82.50 is the tax portion of the $1,000 refund ($1,000 × 8.25%), which the client's integration booked against revenue but never reversed from the liability. The fix is a correcting entry that debits Texas sales tax payable for $82.50, after which the ledger agrees with the platform report and the return at $3,630.00.
Without this sales tax reconciliation, the firm would have either filed $3,712.50 and overpaid, or filed $3,630.00 and left a balance in the payable account that nobody could explain at year end.
Every return should pass a short exception check. The items below are the ones that most often reveal a data problem:
Record each exception, the explanation and the person who cleared it. That record becomes the review trail if the client is later selected for an audit, a process described in our guide on how to handle a sales tax audit.
A few recent rule updates change what goes into the monthly file. This section covers only the ones that touch the reconciliation itself; our summary of sales tax changes for 2026 lists the wider state changes.
The Illinois Department of Revenue announced in Bulletin FY 2026-12 that, on or after January 1, 2026, the only remote seller test is whether the retailer makes $100,000 or more in cumulative gross receipts from sales to Illinois purchasers. The bulletin states that "The 200-transaction threshold no longer applies." A client selling many small orders into Illinois may have been registered only because of the transaction count, so the reviewer should look again at whether that registration is still needed and record the conclusion.
Many firms use Form 1099-K as a cross check on gross marketplace and processor receipts. The IRS explains that a payment app or online marketplace reports payments for goods or services when they total over $20,000 in more than 200 transactions, while a payment card processor issues the form no matter how many payments the seller received or how much they were for. A smaller seller may therefore receive a 1099-K from its card processor but none from a marketplace, so the firm should rely on the platform's own sales reports for the annual tie out. Our article on the Form 1099-K reporting threshold for 2025 and 2026 explains the change in more detail.
The governing board of the Streamlined Sales and Use Tax Agreement reports that twenty-four states have adopted the simplification measures in the Agreement, including a central, electronic registration system for all member states. For clients with many registrations in member states, central registration can cut the time spent opening accounts. Our overview of Streamlined Sales Tax explains how the agreement works.
A complete monthly file for each client contains:
Firms that move preparation work to an outside team keep these controls in place and add access rules for portal logins and client data. The scope, review points and cost questions for that arrangement are covered in our guide to outsourcing multi-state sales tax compliance for CPA firms.
What is sales tax reconciliation? It is the process of matching the sales tax collected according to the client's sales platforms, the sales tax payable recorded in the general ledger and the amounts reported and paid on each state return. Differences are investigated and corrected before the return is filed.
How often should sales tax reconciliation be done? At least as often as the client files, and monthly for most e-commerce clients, even in states where the return is quarterly. Monthly work keeps refund and integration errors small and easy to trace.
Do marketplace sales need to be reconciled if the marketplace pays the tax? Yes. Some states, including Texas, require marketplace sales to appear in total sales on the seller's return, and they count toward the remote seller safe harbor. The tax the marketplace collected should be kept out of the seller's payable account.
Who should decide nexus and product taxability? Those calls involve judgment and belong with the firm's qualified reviewers. Support staff, in house or outsourced, can gather the sales data by state and flag new activity for review.
What causes most sales tax reconciliation differences? The most common cause is a refund or chargeback that the integration books against revenue without reversing the tax. Marketplace payouts recorded net of fees and facilitator tax are another frequent source of variances.
Madras Accountancy works with CPA firms on recurring sales tax support for e-commerce and multi-state clients, including data collection from sales channels, reconciliation workpapers, filing calendar upkeep and return preparation for your team's review. To discuss how this could fit your firm's process, contact our team.
The section 4960 excise tax is 21% of nonprofit pay over $1M. From 2026 it covers all employees. See the medical carve-outs, Form 4720 and a worked example.
The paid family and medical leave tax credit is permanent from 2026. See the 12.5% to 25% rates, the premium option, the 6-month rule and how Form 8994 works.
Opportunity zones become permanent in 2027 under the One Big Beautiful Bill. See the new deferral, rural bonus, and the 2026 handoff.
