Online stores can scale from a side hustle to six figures in a single season, and that growth is exactly what makes tax tricky. This guide covers GST on physical and digital goods, importing stock, the marketplace rules, and the provisional-tax surprise that hits fast-growing New Zealand sellers.
Tax issues in your field
Selling online has a way of crossing tax thresholds before you have noticed. A store can sit quietly under the radar for months, then a viral product or a good Black Friday tips you over the GST line, into provisional tax, and into territory where your platform, your payment processor and Inland Revenue all want different things from your records. The growth that feels exciting on the dashboard is the same growth that creates the tax exposure.
The recurring issues for NZ online sellers are: working out when you must register for GST as sales climb, treating imported stock and the GST charged at the border correctly, handling digital goods and services sold across borders, reconciling the fees and payouts from marketplaces and payment processors, and being ready for provisional tax the first year your profit jumps. Add inventory that you have paid for but not yet sold, and you have a classic mismatch between cash in the bank and taxable profit.
There is also a record-keeping reality unique to e-commerce: your sales data lives in a platform, your money lands through a processor that nets out its fees, and your stock costs come from suppliers who may be overseas. Three systems, three formats, one tax return. The sellers who stay calm at year-end are the ones who connected these systems early so the numbers reconcile themselves.
GST and your situation
The same rule applies to online stores as to any other business: you must register for GST once your turnover passes $60,000 in a 12-month period, and GST is charged at 15%. The difference for e-commerce is how fast you get there and how many directions your sales come from. It pays to watch your rolling 12-month turnover, not just the financial year, because the obligation is triggered the moment you cross the line, not at the end of the year.
Where your customers are changes the picture:
| Scenario | Typical GST treatment |
|---|---|
| Physical goods sold to NZ customers | Standard 15% GST charged and returned |
| Goods exported to overseas customers | Often zero-rated, so 15% is not added but the sale is still reported |
| Importing stock into NZ | GST charged at the border, generally claimable as an input credit |
| Digital products and services | Cross-border rules apply; treatment depends on where the customer is |
Two points trip people up. First, zero-rated is not the same as exempt or ignored. Exported sales still go on your return at 0%, and you still claim GST back on the costs of making them, which can actually put you in a refund position. Second, the GST you pay at the border on imported stock is usually claimable, so importers who do not record it correctly are quietly overpaying. A clean GST setup for an online seller captures the input credits on imports and fees, which is often where the real saving sits.
Deductions specific to you
Online stores have a long, easily-missed list of deductible costs because so much of the business is digital and paid by card. The categories that matter most:
- Cost of goods sold — the wholesale or manufacturing cost of the stock you actually sold in the year. Unsold inventory is not a deduction yet; it sits on your books until it sells.
- Platform and marketplace fees — listing fees, commissions and subscription costs charged by the channels you sell through.
- Payment-processing fees — the percentage skimmed from every transaction, which on thin margins adds up fast and is fully deductible.
- Shipping, packaging and fulfilment — couriers, satchels, boxes, and any third-party warehousing or pick-and-pack costs.
- Advertising — paid social, search ads, influencer arrangements and the tools that run them.
- Software — your store subscription, email tools, accounting and inventory apps, all deductible operating costs.
- Home office — if you run the store from home, a reasonable portion of power, internet and rent or mortgage interest may be claimable on a square-metre basis.
The most common omission is the fees. Because they are netted out of your payouts automatically, sellers often record only the net deposit and never see the gross sale or the fee. That understates both your income and your deductions and makes your GST wrong in two places at once. Recording the gross sale, the fee and the net payout separately fixes it.
Structure and provisional tax
Most online sellers begin as a sole trader, which is simple and cheap to run. As the store grows, a company structure often becomes worthwhile: it taxes profit at a flat 28%, ring-fences the business from your personal assets, and looks more credible to suppliers and finance providers. The right answer depends on how much profit you retain versus draw, and how much risk you carry from stock, suppliers and consumer-law obligations.
The surprise that catches fast-growing stores is provisional tax. The first year you make real profit, you pay that year's income tax in a lump, and if your residual income tax tops $5,000 you are then pushed into paying the next year's tax in instalments as well. For a store that doubled, that overlap can feel brutal because the cash is tied up in more inventory, not sitting in the bank waiting for the tax man.
Two tools help. The safe-harbour rule generally protects smaller taxpayers who pay on time under the standard method from use-of-money interest until the final instalment. And the AIM (Accounting Income Method) calculates provisional tax from your live accounting figures, so a store with lumpy, seasonal sales pays based on what actually happened rather than a guess built on last year. For e-commerce, where one season can dwarf the rest, that alignment is genuinely useful. The wrong move is to ignore provisional tax entirely and reinvest every dollar into stock, then meet a tax bill you have no cash to pay.
Keeping records simple
For an online business, good records are mostly an integration problem. Connect your store, your payment processor and your accounting software so each sale, fee and payout reconciles automatically. We are Xero-friendly, so if your store already feeds into it, we can take the file and make the numbers line up. The goal is that your GST return and your annual accounts come straight from data that is already correct, not from a manual export you dread.
- Record the gross sale, the fee, and the net payout separately, never just the deposit.
- Keep a running inventory figure so cost of goods sold is accurate and unsold stock is not mistaken for profit or loss.
- Capture border GST documents on every import so the input credit is claimed.
- Set aside GST and income tax in a separate account as money lands, especially in peak season when it is tempting to reinvest everything.
Fixed fees, no surprises: you will know what it costs to have your store's accounts handled before we begin, so there is no nasty invoice waiting at year-end to match the nasty tax bill.
Book a free review
If your store is growing and the GST, import and provisional-tax pieces are starting to feel tangled, a quick review usually untangles them. Book a free 20-minute tax review and we will look at how your sales, fees and stock flow, flag what to fix first, and tell you plainly whether a company structure is worth it yet. No obligation.
This is general information only, not personalised tax advice. Your store's situation may differ, so confirm the detail with us or check ird.govt.nz before you act.
In plain English: online stores grow faster than their tax setup, so connect your sales, fees and stock now and the GST and provisional-tax surprises stop being surprises.
This is general information, not personalised tax advice.See our full disclaimer.