Taxes and TikTok Shop: What to Keep in Mind

TikTok Shop has opened a whole new world for creators, allowing you to sell products directly to your followers while you entertain and engage them. It’s a game-changer for anyone looking to turn their content into cash, but with great earnings come great responsibilities — and yes, we’re talking about taxes.

Let’s break down everything you need to know about taxes when using TikTok Shop.

TikTok Shop Income Is Taxable

First things first: any income you earn through TikTok Shop is taxable. Whether you’re selling your own products, dropshipping, or earning commissions as an affiliate, the IRS (and your local tax authority) want their cut. It’s important to track all your earnings from the platform so you can report them accurately during tax season.

If you earn $600 or more from TikTok Shop in a year, you’ll likely receive a 1099 form. But even if you don’t receive a form you’re still required to report your income.

You’re Self-Employed!

As someone using TikTok Shop to make money, you’re considered self-employed, even if it’s just a side hustle for now.

Self-employment comes with its own set of tax rules, including paying self-employment taxes (currently 15.3% to cover Social Security and Medicare) on top of your regular federal and state income tax. As a W2 employee, you and your employer split those taxes, but when you’re self-employed, you cover the whole thing.

You’ll need to file a Schedule C (Profit or Loss from Business) with your tax return to report your TikTok Shop income and expenses.

Your Expenses May Be Deductible

One of the perks of being self-employed is that you can deduct business expenses to lower your taxable income. Here are some common deductions for TikTok Shop creators:

Product Costs: The money you spend on inventory, packaging, or production.

Shipping Expenses: Costs for mailing products to customers, including postage and shipping supplies.

Equipment: Your phone, camera, tripod, or lighting setup, if they’re used primarily for your TikTok content. If you also use them for other things, you can track the percentage of business use versus personal use to deduct a portion of these expenses.

Software and Subscriptions: Tools for video editing, graphic design, or e-commerce platforms.

Marketing: Ads, boosted posts, or any other promotional expenses.

Home Office: If you have a dedicated workspace for running your TikTok Shop, you may be able to deduct a portion of your rent, utilities, and internet.

Keep detailed records of your expenses and hold onto receipts year-round. Spending the time to gather these details as they come up will save a ton of time when you’re getting ready to file your taxes.

It’s Smart to Save Money for Taxes As You Go

Unlike a traditional job, TikTok Shop income doesn’t come with tax withholding. That means you’ll need to set aside a portion of your earnings to cover taxes. A good rule of thumb is to save 25-30% of your income for federal and state taxes.

If you expect to owe more than $1,000 in taxes for the year, we recommend that you make quarterly estimated tax payments. These are due in April, June, September, and January. Paying on time will help you avoid penalties and interest and will prevent a huge, unexpected tax bill.

You May Need to Track Sales Taxes

Because every state (and some cities) has different rules for sales taxes, you might be worried that you’re going to be tracking sales tax percentages and sending payments to every state. The good news is that TikTok is registered as a marketplace facilitator. This means that if you’re selling taxable products through TikTok Shop, they will collect and remit sales tax for U.S. sales.

You may need to keep records about sales taxes for reporting purposes, so please make sure you know the rules for your state and locality.

Separate Accounts Make Sense

To make your life (and tax filing) easier, open a separate bank account for your TikTok Shop earnings and expenses. This helps you stay organized and ensures you’re not mixing personal and business funds.

Conclusion

Running a TikTok Shop is an incredible way to monetize your creativity, but taxes and TikTok Shop go hand in hand. By staying organized, setting aside money, and understanding your responsibilities, you’ll be well-prepared when tax season rolls around. Keep creating, keep selling, and most importantly, keep thriving. If you need help with any of the things we mentioned here, book a call to see how we can help. Because we work only with content creators just like you, we understand the issues you have and know the answers to your questions.