13 Important Deductions for Amazon FBA Sellers Filing Taxes 📋
Whether you are an Amazon seller or not, filing tax returns is a tedious and time-consuming task.
However, the benefits of tax deductions from business expenses can be enormous.
In this blog, we will tell you about the tax deductions that you can claim as an Amazon seller.
What is tax-deductible for my Amazon business?
Business expenses that are both ordinary and necessary are tax-deductible for Amazon business owners.
Examples of ordinary expenses include the cost of goods sold, shipping costs, and expenses related to the business’s home office. These expenses are deductible regardless of the business’s income or profit.
Necessary expenses may include amazon fees, donations, subscriptions, education, software, advertising, employee salary and benefits, and consultant fees.
All sellers who make more than $20k of unadjusted gross sales or have more than 200 transactions must report amazon sales on their taxes. Amazon will automatically have a 1099-K form filed out for them.
1. Cost of Goods Sold 💵
The cost of goods sold for Amazon Fba sellers can include the cost of items purchased to sell on the platform, such as the expenses of purchasing inventory, shipping, and handling the products.
This includes expenses related to the amazon FBA seller’s business, such as employee salaries and general business expenses. The amazon FBA seller should also include the amazon FBA seller’s cost of goods sold in the income statement.
Some of the items that amazon FBA sellers can include in the cost of goods sold are expenses related to manufacturing the product, expenses related to internet and tech expenses, employee benefits costs, business education costs, and other expenses associated with running their Amazon FBA business.
The total amazon FBA seller income statement should be accurate and reflect all income sources and expenses properly.
2. Storing Your Amazon Inventory 🚚
As an Amazon seller, you can deduct the expenses of storing your inventory as a tax benefit. Home storage is also eligible for a deduction if the criteria are met.
You can deduct the costs of sales tax transferred to you by Amazon as an amazon seller, educational expenses, and donations of items.
Other deductions include expenses for accessing sales tax software and amazon seller fees (e.g., for registering for the program).
You should keep track of all deductions you take so that you can file taxes efficiently and accurately. You should also consider filing amazon seller tax forms to claim as many deductions as possible.
Amazon FBA Storage
Amazon FBA storage requires paying storage and handling fees which vary depending on the size of the product and the time of year.
To ensure you are properly accounting for these expenses, carefully track all of Amazon’s charges to ensure they can be deducted. In addition to the storage fees, you may also be able to deduct office supplies related to the storage of your Amazon FBA products.
For example, you can use optical media such as CDs and DVDs in the storage of your products. Additionally, office supplies such as printer ink and paper may be deductible.
To deduct these expenses, maintain records that clearly show how much was spent and for what purpose. Finally, it is important to register your Umsatzsteuer-ID and save your Steuerbescheinigung 22f in your Amazon seller account.
You can write off a part of the expenses you incur while storing Amazon inventory at home. If you use the storage space regularly, separate it from your residence, and have no fixed business location, you may be able to claim a business expense deduction.
This includes expenses such as rent or leasing of the storage space, utilities, and insurance. In addition to expenses related to the storage of Amazon inventory, you can also claim expenses related to the office space itself.
Examples of these expenses include business-related expenses such as internet and phone bills and professional services, such as accounting or legal fees.
You can further reduce your business expenses by keeping track of the costs associated with business-related activities such as the purchase of office supplies for your home office.
All of these expenses should be listed on your business tax form so that you can properly itemize them in order to maximize any tax deductions available.
3. Your Home Office 🏘️
When storing inventory in your home, you may be able to write off a portion of your expenses.
You can write off expenses related to the storage of inventory, such as the costs of a closet, shelving, and lighting.
You must meet the criteria of having a dedicated workspace for your business, and it must only be used for business purposes.
Additionally, you should track mortgage interest, insurance, depreciation, and ongoing home expenses when claiming a deduction for your home office.
When it comes to Amazon sales tax handling, many sellers tend to over-complicate the process by trying to collect multiple forms of tax from their customers.
However, this can lead to errors or delays in collecting sales tax from customers. Instead of collecting sales tax from customers manually, it is best to use a sales tax tracking software that will automatically calculate sales tax for sellers on a daily basis.
This way, sellers can focus their efforts on increasing their sales rather than spending time calculating taxes.
4. Shipping Your Amazon Products 🚚
If you receive income from sales of products on amazon.com, the income is reported to the IRS on Form 1042-S, an information statement provided to non-U.s. payees that received income during the year.
To find out your net revenue (Amazon payouts), you can download a disbursement report from Amazon seller central. It is a summary of the money made and expenses incurred for the year for amazon affiliates.
If you received a 1042-S, you can access a digital copy by logging into amazon associates, going to account settings, and clicking on ‘find forms’.
The form shows payments made and taxes withheld if any. Amazon cannot provide tax advice for filing taxes.
5. Packaging and Materials 📦
Amazon sellers can deduct the costs of selling their FBA inventory, such as shipping, amazon fees, and office expenses.
Some of the deductions include amazon inventory costs, amazon fees, shipping expenses, office expenses, education expenses, and retirement plans.
The sales tax nexus applies to amazon FBA sellers in all states where a physical business presence is established.
Storage fees for amazon FBA must be tracked and deducted as part of the overall gross income.
Packaging and materials are deductions that amazon FBA sellers can claim for expenses incurred in the course of business.
Each deduction has its own importance, so it is wise to consider them carefully when filing taxes for amazon FBA sales.
6. Office Supplies 🏢
Amazon FBA sellers are responsible for collecting sales tax in all states that have nexus.
Office supplies are deductible expenses when using Amazon FBA exclusively. You can deduct the cost of office supplies such as ink, paper, computers, and other expenses related to your business on Amazon seller income tax forms.
The sales tax filing frequency varies from state to state. It is recommended to work with a professional to ensure that the necessary tax information is filed correctly.
A professional accountant or tax advisor should provide guidance regarding the deductions and amazon seller income tax filing requirements for the amazon business model.
Deductions such as cost of goods sold, home office costs, employee salary and benefits, and consultant fees may qualify as amazon seller expenses.
A professional accountant or tax advisor can help you determine the best deductions for amazon seller income tax filings and make sure that you are filing amazon seller income tax returns accurately and efficiently.
7. Software and Technology 🖥️
FBA sellers are responsible for collecting sales tax in all states where they have ‘nexus’, which is the state where the seller maintains a business presence.
In addition to taxes, software, and technology tools can help amazon FBA sellers with the filing of sales tax returns.
Among the best tax software and technology tools for amazon FBA sellers are Home office expenses such as internet, tech, software, furniture, and supplies can be deducted from taxes. You can also use a tax accountant or e-commerce consultant to help you file sales tax returns.
Another deduction for amazon FBA sellers is education for online business and e-commerce. You can deduct the cost of your e-commerce education from your taxes. Consultant fees for an accountant, lawyer or designer can also be deducted from taxes.
8. Communications 🧑💻️
FBA sellers may be able to deduct the following communication expenses related to their Amazon business:
Software expenses, such as internet costs, licenses, and maintenance expenses
Subscription fees for software and internet service
Supplier shipping expenses
Office supplies expenses
These expenses may include the cost of amazon.com or amazon.ca products or services and any amazon seller fees paid to amazon to start and manage the seller account.
It is important for an amazon FBA seller to consult a qualified professional to ensure proper deductions are applied. If amazon’s seller status is lost due to tax non-compliance, there could be serious consequences, including the loss of income tax deductions and the potential inability to continue operating the business on amazon FBA.
Selling on Amazon is a great way to make money. However, it requires a lot of hard work and dedication.
First, you have to sell your products online and build a customer base. You also need to maintain proper inventory levels and keep track of your shipping and shipping costs. To stay tax efficient, you must file your taxes immediately.
There are a number of deductions you can claim on your income tax return that can significantly reduce the amount of tax you pay each year. These deductions include transportation expenses, business expenses, and more.
Keeping accurate records of all your communications with Amazon Fba sellers is essential. This includes emails, chat logs, and other forms of communication. It is also important to track the costs of producing and shipping your products.
Any fees associated with fulfillment services or customer support can be deducted. For example, if you hire a courier service to ship your product, you can deduct the fee from your sales tax expenses.
Other expenses that can be deducted include advertising expenses if the expenses are related to business activities. Remember to keep track of the expenses associated with producing and shipping your products as well as any fees related to fulfillment services or customer support.
9. Professional Services 💁
Legal fees, accountants and bookkeepers, and consultants are all tax-deductible expenses for Amazon FBA sellers.
Inventory expenses such as the cost of goods purchased for a business, shipping expenses, and amazon sales tax are also tax-deductible expenses for amazon FBA sellers.
It’s important to keep track of expenses so you can claim the deductions you’re eligible for. It can be easy to overlook small expenses that add up to big deductions. However, by writing down expenses in a business journal, it’s easier to track expenses and ensure that you claim the deductions you’re eligible for.
Other expenses to consider include home office costs, education expenses, employee salary and benefits, and consultant fees. Each of these types of expenses is eligible for tax deductions if they’re associated with running a business.
Besides tracking your income and expenses on a business’ income tax return, a good tax deductions plan could include self-employed individuals using a tax formulas calculator to find deductions for 1099 contractors, freelancers, and creators.
Dedicators must ensure they comply with the tax requirements of Amazon FBA sellers. One of the key factors to consider is the storage and handling fees that must be paid throughout the year. Overpaying storage and handling fees can result in under-reported sales and income, which can have a significant impact on business taxes.
Sellers should also track the cost of goods sold and expenses related to inventory, such as amazon fees, cost of goods sold, and shipping costs.
Finally, sellers must ensure that all of their inventory is accounted for and properly labeled. By tracking these costs throughout the year, sellers can ensure they are accurately reporting their income tax.
Amazon FBA sellers must report sales and pay taxes on them, which can be a tedious process. It is essential that they collect sales tax in all the states where they have a business presence, known as “nexus”.
They may do this by collecting sales tax from the customer or depositing tax directly into state tax collections services.
In addition to sales tax, Amazon sellers must also account for professional expenses such as contractor expenses, amazon fees, supplier shipping, home office expenses, health insurance plans, and retirement plans.
Other costs that should be reported include shipping costs, cost of goods sold, education for online business and e-commerce, and employee salary and benefits.
10. Bank and Business Fees 💵
Amazon FBA sellers must report their take-home income on their taxes to the IRS if their unadjusted gross sales exceed $20,000 or have more than 200 transactions.
Common deductions for Amazon FBA sellers include the following expenses:
FBA Inventory costs, Shipping costs, Amazon fees, Cost of goods sold, Home office costs, Education, and employee salary and benefits.
Seller fees from Amazon, eBay, Etsy, and Shopify are all deductible expenses.
If you meet the income criteria and the tax year is the 2017 tax year or later, then sellers with an income of $20k or more will have a 1099-K form filled out for them automatically. This form details information about income received as a seller on amazon.com and income tax withholdings.
As you can see, there are many deductions available for amazon FBA sellers to help them save money and file taxes efficiently.
11. Business Travel 🛫
Amazon FBA sellers can take advantage of deductions related to business travel expenses.
Common deductions include costs related to airfare, car rental, hotels, meals, and other expenses incurred while on business trips. These expenses must be clearly related to the seller’s business and documented in writing.
Business travel deductions require an accurate record of expenses, including receipts and other documentation. If you fail to report business travel deductions on tax forms, you may lose your sales tax status as a seller on the Amazon platform. Moreover, failing to report business travel deductions could lead to penalties and interest charges.
It’s important for amazon FBA sellers to keep track of their business travel expenses and report them correctly on tax forms. Otherwise, they could end up losing sales tax status or incur penalties and interest charges.
12. Use of Your Vehicle 🚘
Business-related mileage is a tax-deductible expense.
It can be used to calculate the business-related miles driven by an employee for the purposes of reimbursing expenses related to the employee’s job.
This includes airfare, hotel, and rental expenses. Business-related travel expenses, such as airfare, ground transportation, lodging, and local transportation can be written off as well.
These expenses must be directly related to the business. When deducting business travel expenses, be sure to have solid documentation to support your claims.
Moreover, make sure that you don’t fall for any tax traps or loopholes when claiming business expenses. This will ensure that you are using deductions legitimately and avoiding unnecessary tax costs or penalties.
13. Business Meals & Entertainment 🍽️
Business meals and entertainment expenses may be tax deductible, with the relevant limit being 50% of the expenses. However, solid documentation must be provided to substantiate these expenses.
Generally, business meals while traveling for work, with employees for meetings, and for employees during work shifts for the convenience of the employer are 50% deductible.
Hence, the deductibility of meals with business clients and associates is unclear. In addition, client entertainment is no longer deductible as of 2018. It is always a good practice to keep good records of business expenses such as business meals and entertainment expenses to support a tax deduction claim in the future.
Besides the above-mentioned deductions, business owners can also claim business travel expenses, vehicle expenses, business-related meals, and entertainment.
The good news is that, unlike most other deductions you can claim, the tax deduction for business expenses is 100 percent deductible! So go ahead and take advantage of it.
A business owner’s professional knowledge and expertise in tax laws are vital to make the most of deductions.