If a customer requests a return or exchange, how do we adjust revenue we've already reported?
You adjust it by deducting the amount corresponding to the return or exchange from what you already reported, and you should keep the return-request records and refund documentation together. Sales staff are filed as employment income if regularly employed, or as business income with 3.3% withholding if contracted per session, and platform fees and shipping costs from an online marketplace like Smartstore are deducted separately from store revenue and expensed in full at the time they're incurred.
The Trickiest Part — Seasonal Inventory and Online/Offline Revenue Segregation
This business's strong seasonality demands precise inventory and revenue management
Recognize a Loss for Clearance Sales and Disposal of Off-Season Inventory Too
When you sell off-season apparel at a steep discount or dispose of it, keeping records of the actual selling price or disposal can let you recognize an inventory valuation loss. Adjusting inventory arbitrarily without documentation may be mistaken for unreported revenue.
Keep Online-Shop Revenue Separate from Store Revenue
If you run both a physical store and an online marketplace like Smartstore, you need to track revenue and returns/exchanges separately by channel to file revenue accurately and manage inventory properly.
Income Structure Features of Fashion & Apparel Retail
Key Expense Items
Must-Know for Fashion & Apparel Retail
Split Store Fixtures & Inventory Management by Category to Save on Taxes
From store interiors to online-shop operating costs, categorizing each item correctly is what cuts unnecessary tax
Long-Term Fixed Assets — Equipment Subject to Depreciation
Store fixtures: store interior, display racks
Fitting fixtures: fitting rooms, full-length mirrors/lighting
Once a per-unit purchase exceeds KRW 1 million, it's classified as a depreciable asset and must be expensed over its useful life.
Cost of Apparel Purchased — Inventory Asset Management
The cost of seasonal apparel is tracked as inventory at purchase and recorded as cost of goods sold when sold. When you discount or dispose of off-season inventory, keep supporting documentation to have the loss recognized.
Personal-Service Costs — Sales-Staff Labor Costs
Sales staff are filed as employment income if regularly employed, or as 3.3% withholding business income if contracted per session.
Online-Shop Operating Costs
Platform fees and shipping costs from marketplaces like Smartstore are a recurring monthly cost, expensed in full at the time incurred, and should be tracked separately from store revenue.
| Category | Typical Examples | Tax Treatment |
|---|---|---|
| Long-term fixed assets | Store interior, display racks, fitting-room fixtures | Depreciated once over KRW 1M |
| Cost of apparel purchased | Seasonal apparel inventory | Tracked as inventory, loss recognized on discount/disposal |
| Personal service | Sales-staff labor costs | 3.3% withholding or employment income |
| Online-shop operating costs | Platform fees, shipping | Expensed immediately, managed by channel |