5 Tax Tips For Amazon Sellers And Other E-Commerce Entrepreneurs
Online sellers have a tax-saving edge over physical retailers. In e-commerce, sellers’ sales tax obligations are typically much lower than those of brick-and-mortar stores. This is because online sellers don’t need to collect sales tax from customers and pay it to the government.
However, online sellers still need to be aware of their tax obligations and how to correctly account for them when running their businesses. This blog will cover some of the most important tax tips for e-commerce entrepreneurs and online sellers.
1. Get a good tax accountant 🔢
It is important for Amazon sellers to have a good tax accountant to help them manage their finances.
A tax accountant can help with various aspects:
Running a business
Including creating and maintaining financial records
Filing tax returns
Understanding tax regulations
Tax software like Fetcher can make sorting through financial data easier. This software helps track business expenses and income, so you can easily comply with tax laws.
Professional and individual sellers with more than 50 transactions need to ensure their tax information is up to date. This includes forms 1065 for businesses with taxable income of $10 million or more and forms 1040 for individuals with taxable income of $10,000 or more.
It is vital for amazon sellers to find a trustworthy accountant or tax lawyer to ensure taxes are reported correctly. You should consult an accountant if you have any questions about your business’s finances or tax obligations.
If it’s time to file taxes, consider using tax software such as TaxJar and Taxify to automate the process and save time and effort. These tools can help amazon sellers organize their finances, track spending, and file taxes easily.
2. Stay on top of state sales tax 🔝
E-commerce is booming and many sellers are cashing in on it.
However, one of the challenges e-commerce sellers face is tax compliance. Some states require mandatory sales tax collection while others don’t. A few months ago, Amazon was caught collecting tax illegally in some states including California and New York.
E-commerce players must be aware of local taxes as well. The amazon facilitator rules require them to collect and remit sales tax to the applicable tax body.
This requires retailers to track and pay sales tax. Besides, using a tool such as TaxJar can help retailers keep track of and pay sales tax on time for accurate reporting to the tax authority or the customer.
For e-retailers, staying compliant with state and local tax regulations is essential for business success.
3. Select the right inventory accounting method 🔢
Small e-commerce businesses with under $25 million in annual sales may benefit from electing to treat inventory as non-incidental materials and supplies.
This method can help smaller e-commerce businesses track and manage their stock more effectively, and it can result in additional write-offs and deductions for items such as shipping costs and amortization of intangible assets.
E-commerce sellers should consider investing in automation solutions with multichannel inventory sync to keep track of orders, quantities, and prices. These solutions can help e-commerce businesses track their inventory levels more accurately and efficiently.
E-commerce sellers must also consider monthly subscription fees, per-item fees, referral fees, closing fees, high-volume listing fees, and refund administration fees. They should carefully consider the cost of each tax item so they can calculate accurate tax liabilities.
For small e-commerce businesses, it’s important to be aware of the tax laws and regulations that apply to them.
4. Don’t forget deductions ➖
Don’t forget deductions
Amazon fees
Shipping expenses
Home office and office expenses
Travel to vendors
Marketing expenses
They are all tax-deductible for Amazon sellers.
Using an LLC may be the best option for non-US sellers to take advantage of Amazon seller tax deductions. Receipt apps such as Shoeboxed can be used to track receipts for tax deductions.
1099 from amazon should be obtained to calculate taxable income. Vendors should be called to see what reporting is available to Amazon sellers. This will help them get the tax deductions they deserve.
5. Incorporate the right way 🛣️
If you are an e-commerce entrepreneur, tax season can be daunting and time-consuming.
However, there are a few tax tips you can follow to help reduce your total taxable income from Amazon and stay on budget.
One way is to incorporate the right way. Establishing an organized system to track sales and deductions will help reduce your tax burden and overall income for the year.
Another tip is to use effective bookkeeping solutions that help you keep track of your e-commerce sales. Look for seller accounting software that connects Amazon and QuickBooks or another bookkeeping software.
This will help you stay on top of your growing sales and tax obligations and make tax season easier. Another tip is to understand the sales tax rules and regulations. This will ensure your business remains compliant and tax expenses are minimized as much as possible.
Conclusion 🤔
Today, e-commerce entrepreneurs can use their tax expertise to help their online sellers save time and money.
By collecting sales tax data, filing sales tax returns accurately, and streamlining their business processes and software, e-commerce entrepreneurs can ensure that their online sellers are compliant with tax laws and regulations.
It doesn’t matter if you sell locally or online; following these tips will help you save time, money, and stress.
