Ecommerce bookkeeping for Downtown LA brands

Short answer: Ecommerce bookkeeping for Downtown Los Angeles brands splits wholesale sales from online retail sales, because the City of Los Angeles taxes them under different classifications at different rates. Wholesale buyers' resale certificates are kept on file. Payments to cut and sew contractors are matched to the contract records California asks apparel brands to keep.

One brand, two kinds of sales

A typical Fashion District label sells on net terms to boutiques and other stores, writes orders in a showroom during market weeks, and runs its own online store for shoppers. The goods are the same. The money moves differently: wholesale invoices are paid weeks later, sometimes short after a chargeback, while online orders arrive as daily payouts, net of fees and refunds.

For the City of Los Angeles, the difference also changes the tax. The Office of Finance taxes wholesale sales at $1.01 per $1,000 of gross receipts and retail sales at $1.27 per $1,000. Its rate page says a business with both kinds of sales must separate them and pay tax under each classification.

Why the split has to be in the books, not in February

Every business Downtown is inside the City of Los Angeles and renews its Business Tax Registration Certificate by the end of February, on the prior year's gross receipts. If online and wholesale sales share one income account, someone has to pull a year of invoices and payouts to divide them. If they never get divided, all of it may be reported at the higher retail rate.

We set up separate income accounts for wholesale, online retail and any showroom or sample sales from the start. Sales tax collected stays out of both, since the Office of Finance retail guide says sales tax is not subject to the city business tax. The February figures then come straight from the year end report.

Your CPA confirms classifications and any election the Office of Finance allows. We keep the receipts sorted so either choice can be applied.

Resale certificates for wholesale accounts

Wholesale orders are usually sales for resale, and the buyer gives you a resale certificate instead of paying sales tax. CDTFA says the certificate must be taken in good faith and on time, and it lists what a valid one includes, such as the buyer's seller's permit number and a statement that the goods are for resale.

We keep a certificate on file for each wholesale account and flag any account billed without tax that has none. Orders delivered inside the City of Los Angeles carry the 10.25 percent rate CDTFA set for October 1, 2026, and orders shipped elsewhere in California can carry a different rate. We keep orders before and after that date apart for the fourth quarter return, and your CPA confirms the rate by delivery address.

Cut and sew contractors and the records behind them

Many Downtown brands have garments made by local sewing contractors. California's Garment Worker Protection Act covers brand guarantors, meaning any party that contracts for garment manufacturing. The Labor Commissioner says brand guarantors must keep certain records for four years, including contract worksheets that show the agreed price per unit with each contractor.

In the books, each contractor bill is matched to its worksheet and production order, and the worksheet is attached to the bill. That keeps cost per unit traceable from fabric to finished goods, and it keeps the papers in one place if anyone asks for them.

Compliance with garment labor law is a legal question. Talk to an employment lawyer about your obligations. We only keep the financial records organized.

A typical cleanup: the label that paid retail rates on wholesale

Picture a women's wear label with a Fashion District showroom, about forty boutique accounts and a Shopify store that has grown to half its sales. Every dollar went to one income account called sales. Shopify payouts were booked net, so fees and refunds vanished. Two department store chargebacks sat in receivables for a year. At renewal time, the owner reported the bank deposit total as gross receipts, sales tax included, under one retail classification.

We split the year into wholesale invoices and online orders using the invoicing system and the Shopify payout reports. Payouts were grossed up into sales, fees and refunds, and the chargebacks were written off against the invoices they belonged to. Sales tax collected moved to a liability. The CPA received wholesale and retail gross receipts as two clean figures, and the owner saw that wholesale carried more of the margin than the deposits suggested.

How we start with a Downtown brand

1. Map the channels We list every way you sell: wholesale accounts, showroom orders, your online store and any marketplaces.
2. Split the income Separate income accounts go in for wholesale and retail, with sales tax and refunds on their own lines.
3. Tie production to inventory Fabric, trims and contractor bills are attached to production orders and moved into finished goods.
4. Close monthly You get margin by channel, receivables by wholesale account and year to date gross receipts by city classification.

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