Important considerations for Shopify stores selling on Facebook or Instagram

Important things to know if you use Shopify to sell on Facebook or Instagram.

With your Shopify store you have to ability to use the Facebook & Instagram app on Shopify to sell products.  Meta/Facebook offers details here about the integration. 

In working with our clients, we have noticed a few important things for the accountant or controller to know:

1. Sales tax is generally collected and paid by Meta for sales through this channel.  You will want to verify this is the case to ensure you do not over pay sales tax.  

2. Meta occasionally offers coupons/discounts which are reimbursed to you that will show up as type "Manual" in your payments. These reimbursements deposit with your Shopify Payments payouts. These are commonly called "Channel Promotion Credit" in the Shopify payout interface but may show up as a generic adjustment in the payout. More discussion details are below on this. See below for an example:

Sales Tax Collected and Withheld

We have noticed a common occurrence with clients where adjustments are made during the payout process for sales on the Facebook or Instagram channel. These adjustments found in a Shopify payout are linked only by the order ID and typically involve the withholding of sales tax from a Shopify payout, as Facebook handles the remittance of sales tax.

In the example below highlighted in the top green row, an adjustment of -5.65 (money removed from the deposit) can be seen for order #1721542. 

But the deposit detail doesn't explain what is happening so we need to go to the order and look at the notes. 

When you go to the notes you see this for order #1721542:  

This indicates that these taxes were withheld and paid by Facebook so you want to be sure you don't also pay this sales tax. 

Bookkeep has a solution to capture the sales tax collected and withheld to ensure you do not overpay for your sales tax being withheld. Learn more about our solution here.

Channel Promotion Credits

Additionally, in the example above, you will see a positive adjustment for order #172542 in the middle green row highlighted for 10.32.  When we go to the order notes, we see this:

What is happening here is the customer is not paying the full amount of the order,  and Meta is providing the remaining balance for the order as a reimbursement to the seller.  

Unfortunately for the accountant, these funds are deposited with your Shopify Payments payout, but are marked on the sale as Manual payments as shown below:

This means you will need to filter to the Facebook & Instagram Channel in your Shopify Reporting at the end of the month and do an adjusting entry to transfer from Manual Payments to your Shopify Payments Balance account.  

Bookkeep recently added the capability to catch these vague adjustments to better label them. Specifically, in the case of these "Channel Promotion Credits", we are able to better label them as being "Facebook & Instagram - credit" or "Facebook & Instagram - debit" dependent on whether an order is being paid out or refunded. This gives you the ability to map these adjustments to your Manual Payments balance. See below for an example of how Bookkeep captures these details.

In Shopify, this specific payout/deposit shows two orders from Facebook with a channel promotion credit as shown below: 

Bookkeep is able to identify these adjustments and label them as "Facebook & Instagram - credit" as shown below (11.90+12.90 = 24.80):

Having a clear understanding of these adjustments within a Shopify payout is crucial for effectively reconciling your balance accounts. By being aware of how sales tax is handled and any reimbursements from Meta/Facebook, you can ensure that you are accurately tracking your finances and avoiding any potential overpayment issues. This knowledge empowers you to confidently manage your Shopify store's financial transactions and streamline your accounting processes.

Our team is standing by to help with this or any other challenges you encounter with Shopify.  Feel free to contact us at support@bookkeep.com.