February 22, 2018  
 
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Top 5 Expense Categories For Online Sellers And SMBs

Written by Ken Gaebler
Published: 4/18/2012

Study of SMB tax data shows the leading deductible expense categories for both online and offline SMBs.

Ever wondered how your deductible expense categories stack up against other SMBs? If costs of goods sold or taxes/licenses represent the lion's share of your budget, you're probably right on track with other companies in your competitive set.

Popular Tax Deductions for SMBs and Business Owners

According to a data-based study by online accounting solution provider, Outright, the top five SMB expense categories vary based on whether the business follows a traditional model or is primarily an online seller.

For online sellers, the top deduction categories (as a percentage of total expenses) include:

  • 1. Cost of Goods Sold (47%)
  • 2. Marketplace Fees (26%)
  • 3. Shipping (13%)
  • 4. Office Supplies (2%)
  • 5. Utilities (1%)

Offline or traditional SMBs report a slightly different mix of deductible expenses with Taxes/Licenses, Office Supplies, Meals, Cost of Goods Sold, and Travel occupying the top five slots.

It's important to note that both groups neglected to deduct a handful of high value expenses that are common to small and medium-sized businesses. For example, it's estimated that nearly all SMBs can justify at least $1,000 in mileage expenses (accrued at 55.5 cents per mile) as well as investments in marketing and advertising.

Based on this year's data, SMB owners are advised to invest more time in documenting mileage, advertising and other potentially valuable expense categories in order to reduce their overall tax burden.

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