Can you deduct payment processing fees from online sales?

Generally, yes: payment processing fees for online sales are usually deductible business expenses if they are ordinary and necessary for your trade or business.

For U.S. tax filings, the usual approach is:

1. Report your gross sales/receipts as income, not just the net amount that lands in your bank account.
2. Deduct payment processing fees separately as a business expense.
3. If you’re a sole proprietor or single-member LLC taxed as a sole proprietor, these fees are commonly reported on Schedule C as a business expense, though the exact line/category can depend on your bookkeeping and the current IRS instructions.

Why this matters: payment processors often report payment activity to the IRS on Form 1099-K, so your reported income and deductions should match your records rather than your net deposits.

A couple of important caveats:

• The exact treatment can vary by entity type (sole prop, S-corp, partnership, C-corp) and by country/state.
• Refunds, chargebacks, sales tax collected, and mixed personal/business transactions can change the bookkeeping.
• Exact filing line placement should be checked against the current IRS instructions or your tax professional, since form line details can change.