How to Track COGS on Etsy — A Maker's Guide to Cost of Goods Sold

You open your Etsy stats dashboard. Revenue is up. Orders are up. Everything looks great — until you sit down to figure out what you actually kept from all those sales.

This is where most Etsy sellers hit a wall. Etsy shows you gross revenue. It shows you your fees. It even shows you traffic and conversion data. What it doesn’t show you is your cost of goods sold — the actual cost of producing each product you made and sold.

And without that number, you don’t really know whether your shop is profitable.

What is COGS for an Etsy seller?

COGS (cost of goods sold) for an Etsy seller is the total cost of materials, direct labour, and allocated overhead required to produce the items you sold in a given period.

It’s not what you spent on supplies last month. It’s not your total expenses. It’s the specific cost of the goods that went out the door — calculated per unit, then scaled to how many you sold.

Here’s the basic COGS formula for a handmade product:

COGS = (Materials cost per unit + Labour cost per unit + Overhead allocation per unit) × Units sold

Let’s break down what each piece means:

Materials — every ingredient or component that goes into one finished item. For a candle: wax, wick, fragrance oil, dye, container, label, box. All of it, at the actual cost you paid, not an approximation.

Labour — your time, paid at a real hourly rate. This is the one most Etsy sellers skip, and it’s also the one that most often explains why a shop feels busy but never gets ahead.

Overhead — indirect costs that support your production but don’t attach neatly to one product. Studio rent, tools, insurance, packaging supplies, electricity. These get allocated across your products based on some reasonable method (time, units produced, etc.).

Add those three together, and you have your true cost per unit. Multiply by units sold, and you have COGS.

Why Etsy doesn’t show you your real cost of goods sold

Etsy’s dashboard is built for revenue, not for manufacturing. It tracks what comes in — orders, sales, fees — but it has no visibility into what it costs you to make things. That’s not a design oversight; it’s just not what the platform is for.

What Etsy shows you is:

• Gross revenue (what buyers paid)
• Etsy fees (listing, transaction, payment processing)
• Estimated net (revenue minus Etsy’s cut)

What it doesn’t show you is anything on the cost-of-goods side. No per-unit materials cost. No labour. No overhead. No COGS report. No profit margin by product.

This means you can have a shop doing $8,000/month in revenue and genuinely not know if you’re making money. If your COGS is $6,500 and your Etsy fees are $1,200, your actual margin is $300. That’s a very different picture to what the dashboard implies.

The spreadsheet method — and why it breaks down

Most Etsy sellers who try to track COGS land on spreadsheets first. It makes sense: low barrier, free, familiar. The basic approach is:

1. List every supply you buy and the cost per unit (e.g. wax: $0.18/oz)
2. Build a recipe for each product (e.g. 8oz candle: 6oz wax, 1 wick, 2ml fragrance)
3. Calculate materials cost per unit from the recipe
4. Add a labour cost (time × hourly rate)
5. Add an overhead allocation
6. Multiply by units sold to get COGS

In theory, it works. In practice, it starts breaking down the moment your shop scales past a handful of products.

The problems:

• Supply prices change. That wax price from 8 months ago isn’t accurate anymore. Updating every recipe every time a supplier raises prices is a project in itself.
• Batch sizes complicate things. You made 24 candles in one batch. How do you account for the half-oz of fragrance that evaporated during pouring? Or the wax you used to test the new colourway?
• Multiple products share materials. Your lavender candle and your eucalyptus candle both use the same wax and wick. When wax goes up 10%, you need to update every recipe that uses it — and spreadsheets don’t cascade those changes.
• Tax time is painful. Calculating your actual COGS for Schedule C means reconstructing how much of your inventory was actually sold, what the per-unit costs were, and what you have left. From a spreadsheet. For a year’s worth of products.

This is why so many makers end up with an approximate number — which is better than nothing, but not good enough to base pricing decisions on.

How to track Etsy COGS properly with recipe software

The alternative to spreadsheets is recipe-based inventory software — tools built specifically for manufacturing businesses (including handmade sellers on Etsy).

The core concept: you build a recipe (also called a bill of materials or BOM) for each product. The recipe lists every material and the exact quantity used. When you record a batch of manufacturing, the software deducts materials from your inventory and calculates the per-unit cost automatically. When a sale comes through, COGS is calculated from the recipe.

With Craftybase, the workflow looks like this:

1. Set up your materials — record every supply you buy, at the price you paid. When prices change, update the material and every recipe that uses it updates too.
2. Build recipes for each product — specify quantities, note any waste or yield loss.
3. Record manufacturing runs — when you make a batch of 24 candles, log it. Stock levels adjust automatically.
4. Connect your Etsy shop — orders import automatically, COGS is calculated per order, and your running profit margin is visible in real time.

The critical difference: you’re not manually calculating anything. The system tracks what you used, what you sold, and what it cost — and it handles the cascade when a material price changes.

If you sell on multiple channels, this becomes even more valuable. The same recipe applies whether the order came through Etsy or your website. Your COGS is consistent regardless of where the sale landed. (If you’re selling on both Etsy and Shopify, there’s an extra layer to this — multi-channel COGS tracking has its own nuances worth understanding separately.)

COGS for Etsy tax time — Schedule C and year-end rollups

At tax time, your COGS becomes a critical number for filling out Schedule C Part III (Cost of Goods Sold). This is the section where you report:

• Beginning inventory (what you had at the start of the year)
• Purchases (materials you bought during the year)
• Ending inventory (what you have left at year end)
• The COGS figure itself, derived from those three numbers

The formula the IRS uses: Beginning inventory + Purchases - Ending inventory = COGS

The catch: this requires you to have a reliable count of your inventory at the start and end of the year, and a reasonable record of what you bought. If you’ve been running on rough estimates, that’s where tax time gets complicated.

Recipe-based software tracks this automatically throughout the year. At year end, you have an actual inventory count and a real COGS figure — not a back-of-napkin calculation that your accountant will politely question.

For a deeper walkthrough of how Schedule C works specifically for handmade sellers, the COGS on Schedule C guide covers Part III line by line.

What to include in your Etsy COGS (and what to leave out)

Include in COGS:

• Raw materials (wax, thread, clay, glass, resin — whatever you make with)
• Components and findings (clasps, hardware, labels, packaging that becomes part of the finished product)
• Direct labour (your time, or employees’ time spent on production)
• Overhead directly tied to production (studio rent if used exclusively for making, manufacturing equipment depreciation)

Do not include in COGS:

• Etsy fees (these are selling expenses, not production costs)
• Shipping materials (unless bundled into product cost — classify consistently)
• Marketing or advertising costs
• General business expenses (software subscriptions, bank fees, general admin)

The distinction matters for tax accuracy and for understanding your true product margin. Mixing selling expenses into COGS gives you an inflated cost-per-unit that makes pricing harder, not easier.

COGS and your Etsy pricing strategy

COGS gives you a floor for your pricing — and that’s where it becomes genuinely useful. If your COGS for a $30 necklace is $22, your margin is $8 before Etsy fees (roughly $4-5 on a $30 sale). That leaves you $3-4 gross profit — which might be acceptable, or might mean you need to reprice, reduce materials cost, or both.

A useful benchmark: most handmade product businesses target a gross margin of 50-70%, meaning COGS should be 30-50% of your selling price. If you’re selling at $30 and COGS is $22 (73% of price), that’s a signal to investigate.

This doesn’t mean you need to hit 70% margin overnight. It means you need to know where you are before you can make informed decisions. Makers who price from COGS rather than from what competitors charge tend to run more sustainable shops — even if they price slightly higher.

For a full breakdown of how to use COGS in your pricing formula, the general COGS guide for handmade sellers covers the full calculation including overhead allocation methods.

Multi-channel COGS — when you’re selling Etsy and Shopify

If you only sell on Etsy, your COGS calculation is relatively straightforward: materials + labour + overhead, per unit, per sale.

If you’re selling on both Etsy and Shopify (or any other channel), it gets more nuanced. Your production costs are the same on both channels, but your platform costs and therefore your net margin are different. A $40 sale on Etsy leaves you a different amount after fees than a $40 sale on Shopify.

This matters because makers who blend their revenue across channels end up making channel-level decisions based on inaccurate data. Knowing that your candle costs $14 to make is only useful if you also know what it costs to sell on each platform.

Managing inventory across Etsy and Shopify covers the logistics side of running dual-channel operations — including how to keep COGS consistent when orders come from multiple places.

Frequently Asked Questions

Etsy gives you plenty of data. Revenue, traffic, conversion rates, fee breakdowns. What it doesn’t give you is the one number that actually tells you whether your shop is viable: your cost of goods sold.

That’s the gap that recipe-based inventory software fills. If you’re ready to stop guessing at your margins and start knowing them, Craftybase connects to your Etsy shop, imports your orders, and calculates COGS automatically from your recipes — so the number is just there when you need it.

Start your free trial and connect your Etsy shop →