Making Tariffs Tolerable: How to Track, Record, and Survive Them in QuickBooks Online and Xero

If you’ve ever looked at an import invoice and thought, “Why is there a random $1,700 fee listed as ‘Tariff’ next to ‘miscellaneous’ and ‘handling’?”, welcome to the joyless world of international trade.

Tariffs are taxes you pay to bring things into the country. They are also what make your QuickBooks reports scream when you try to reconcile inventory costs. And with new tariffs on imports from China, Mexico, and the occasional mystery country (looking at you, “Other”), it’s more important than ever for small businesses to understand how to handle them.

Luckily, managing tariffs doesn’t have to be a bureaucratic nightmare. You don’t need a PhD in customs law. You just need a few good habits, some workflow fixes, and a basic ability to not cry while using accounting software.

This blog will walk you through how to track and record tariffs like a pro using the two most popular small business accounting tools: QuickBooks Online and Xero. We’ll keep it practical, slightly sarcastic, and SEO-dense enough to make Google blush.

Disclaimer: I’m not a CPA or tax professional, just a small business owner who’s been around the inventory block a few times. The tips in this post are for general guidance only. Before making any tariff-related decisions, especially ones that might make the IRS raise an eyebrow, talk to a licensed accountant or tax advisor.

What Is a Tariff, and Why Is It Trying to Ruin Your Margins?

A tariff is a tax on imported goods, charged by your country’s government. For U.S. businesses, this often means an extra cost slapped on top of your supplier’s invoice, handled by the shipping broker, and dumped into your lap without much explanation.

You’ll see tariffs on things like:

• Imported raw materials
• Finished goods from overseas manufacturers
• Packaging and components
• Literally anything customs decides to charge you for

The current round of tariffs is affecting thousands of common business imports, especially from countries like China and Mexico. These aren’t theoretical charges. They’re real, taxable, and they absolutely affect your COGS (cost of goods sold).

Why Tracking Tariffs Properly Matters

Ignoring tariffs isn’t just sloppy. It causes:

• False profit margins: You think you’re making money, but tariffs ate your margins alive.
• Inventory misvaluation: Your imported goods are recorded at cost, not landed cost, so reports are skewed.
• Tax headaches: If you deduct tariffs incorrectly or miss them entirely, your CPA will develop a twitch.

So yes, even if you “just round up for simplicity,” that simplicity could cost you thousands.

Where Tariffs Actually Show Up

Before we jump into software, here’s what you’re probably seeing on paperwork:

• Customs Entry Summary (CBP Form 7501): This is the government form showing the tariff amount.
• Freight Broker Invoices: These often include customs duty, processing fees, and mystery acronyms no one understands.
• Supplier Invoices (rarely): Occasionally, the supplier absorbs and breaks down tariffs, but don’t count on it.

Key takeaway: the tariff amount is real money, and you’re paying it. Now let’s make sure it ends up in the right accounts.

How to Record and Track Tariffs in QuickBooks Online

QuickBooks Online is great for invoices, expenses, and arguing with your accountant about which expense category your espresso machine belongs in. Here’s how to wrangle tariffs into your QBO setup.

Step 1: Set Up a Dedicated Tariff Expense Account

Let’s keep it clean.

1. Go to Settings > Chart of Accounts.
2. Click New.
3. Choose:
   • Account Type: Expenses
   • Detail Type: Other Business Expenses or Cost of Goods Sold (depending on how you track landed cost)
   • Name: Import Tariffs or Customs Duties
4. Save.

This gives you a dedicated bucket for tracking tariff expenses over time.

Step 2: Attach Tariffs to the Right Purchases

Let’s say you import $10,000 worth of inventory and get hit with $700 in tariffs.

1. Enter your vendor bill or expense for the product.
2. Add a second line item:
   • Category: Import Tariffs
   • Amount: $700
   • Memo: "Tariff for CBP Entry #123456"
3. Optional: attach the CBP form or broker invoice as a PDF.

Boom. You’ve now recorded the expense and tied it to the purchase.

Step 3: Use Landed Cost (Advanced Users Only)

QBO Advanced lets you use landed cost features, but here’s the rub: it’s available only on the Advanced tier.

If you have that:

1. Go to Gear > Account and Settings > Expenses > Bills and expenses.
2. Turn on Track Landed Costs.
3. Assign tariff costs to the specific inventory items.

This rolls the cost into your inventory valuation, making reports far more accurate (and your accountant less rage-prone).

Reporting Tips in QuickBooks Online

Want to see how tariffs are affecting your margins?

• Run a Profit & Loss report.
• Filter for Import Tariffs or your custom category.
• Compare against COGS or specific product sales.

Pro tip: create a custom report to track monthly tariff costs as a percent of total imports. It’ll make you feel like a real economist. Or at least like someone who has their act together.

How to Record and Track Tariffs in Xero

Xero fans, you’re not off the hook. Tariff handling is easy once you know what buttons to click and what Xero-speak actually means.

Step 1: Create an Expense Account for Tariffs

1. Go to Accounting > Chart of Accounts.
2. Click Add Account.
3. Use:
   • Account Type: Direct Costs
   • Code: Something like 520
   • Name: Import Tariffs / Customs Duties
4. Save.

Congrats, you now have a place for those fee monsters to live.

Step 2: Enter the Tariff Charge

Xero doesn’t have a “landed cost” feature natively, so you’ll need to manually track.

1. Create a Bill from your customs broker or freight forwarder.
2. Add a line:
   • Description: "Tariff on shipment from [Country]"
   • Account: Import Tariffs
   • Amount: Whatever amount they hit you with
3. Optional: attach the PDF for audit purposes.

This charges your expense account and keeps your books accurate.

Step 3: Adjust Inventory Manually (if needed)

Xero doesn’t do COGS + landed cost roll-ins automatically. So if you want to include tariff costs in inventory:

• Use Inventory Adjustments.
• Increase the cost of your items based on a per-unit tariff calculation.
• Use a spreadsheet to calculate per-unit extra costs.

Yes, it’s manual. But it's more accurate than ignoring it and letting your profit margins lie to you.

Reporting Tips in Xero

Want to see how tariffs are punching your profits in the face?

• Go to Reports > Profit and Loss.
• Filter by your Import Tariffs account.
• Compare month-over-month or against revenue.

Pro move: tag tariff bills with tracking categories like “Product Line” or “Vendor” to get granular.

A Quick Guide to Avoiding Tariff Mistakes

Whether you use QuickBooks or Xero, most tariff issues come from the same three bad habits:

1. Ignoring Fees You Don’t Understand

If you see “duty” or “customs” or any line item with a five-digit number and a vague acronym, don’t shrug. Ask your broker what it is, and record it properly.

2. Recording Tariffs as Regular Expenses

Don’t lump tariffs into “Shipping” or “Misc.” That makes your COGS inaccurate and your forecasting useless.

3. Forgetting to Attach Documents

Your future self, or your auditor, will thank you for uploading that customs form with the bill. Attach everything.

Bonus Section: What to Do If You're Hit With New Tariffs Tomorrow

Welcome to trade policy roulette.

If new tariffs drop and you don’t know where to start:

• Check your HS (Harmonized System) codes. These determine your tariff rate.
• Talk to your broker. Ask them what percentage you're being charged and on which goods.
• Update your expense categories and tracking systems immediately.
• Notify your accountant. Don’t make them find out during tax season.

And most importantly: don’t panic. Tariffs suck, but they’re navigable.

Tariffs and Inventory Management: The Overlooked Connection

Let’s get real. If you’re importing and reselling goods, tariffs are part of your inventory cost. Ignoring them in your inventory system means:

• You think you’re making 40% profit.
• You’re actually making 18%.
• You don’t find out until it’s too late.

Use either:

• QuickBooks Online Advanced landed cost tools
• Manual cost adjustments in Xero
• 3rd-party inventory tools like Cin7, DEAR Systems, or Katana to help automate tariff roll-ins

Don’t let your inventory system lie to you.

Tools That Can Help Track Tariffs Better

If spreadsheets and guesswork aren’t cutting it, here are a few tools worth looking into:

• LandedCost.io – Integrates with Xero and Shopify
• Freightos – Helps compare and break down international shipping costs
• Customs City – For high-volume importers managing tariff data

These tools aren’t always cheap, but neither is paying 25% more on every shipment and not realizing it.

What Happens If You Don’t Record Tariffs Correctly?

• Your profit reports lie.
• Your inventory costs are wrong.
• Your tax deductions could be off.
• You look confused in meetings. Constantly.

This isn’t just a bookkeeping detail. It’s the difference between growing and drowning.

Final Thoughts: Tariffs Are a Pain, But You’re Tougher

The good news? Once you’ve set up a system for tracking and recording tariffs, it becomes second nature. The bad news? Tariffs aren’t going away.

Between geopolitical tension, economic policy shifts, and the government’s love of making imports more expensive, you need to be ready.

Get your chart of accounts cleaned up. Use your software tools the way they were meant to be used. Don’t be afraid to pester your freight forwarder. And when in doubt, ask your accountant if “miscellaneous fees” can legally include crying in Excel.

This isn’t fun. But it’s doable. And you’ll sleep better at night knowing your margins are real, your inventory is honest, and your profit report isn’t just a liar in a nice font.

You’ve got this.