www.taxprofessionals.com - TaxProfessionals.com
Posted by Dennis Jao

Essential Things Amazon Sellers Need to Know about Taxes

Essential Things Amazon Sellers Need to Know about Taxes

You might be a professional seller on Amazon or sold off a couple of stuff in the past year. It is normal to wonder about the tax implication of your actions as you prepare for the coming tax year. 

This article will shed light on all the essentials you need to know as you prepare for the coming tax year. Here are some tips that help you err on the side of caution as an Amazon seller:

  1. Never Joke with Your 1099-K

The 1099-K is a form used to report sales that provide Uncle Sam with your business information, both monthly and annual gross sales. It takes care of things like shipping fees and sales tax. If you are an individual seller, it is not your responsibility to fill the 1099-K. Amazon will fill out the form and supply you and the seller with 1099k provided you meet the criteria.


Who will receive 1099k from Amazon?

Every seller on Amazon, provided they meet the following condition, will get a 1099-K form by the 31st of July. The conditions are:

  • Over 200 transactions, and 

  • Over $20,000 in unadjusted gross sales. 

You might not meet the criteria above, but if you are a professional seller with more than 50 transactions every year, you must supply your tax info to Uncle Sam. The penalty is losing the seller status. This is not a condition from Uncle Sam but a regulation from Amazon to ensure everyone submits their tax info to maintain compliance with Uncle Sam's regulation.

Sellers that didn’t get their 1099-K from Amazon

Some sellers might meet the criteria above and might not get a 1099-K from Amazon. Such sellers should contact seller support if they cannot find it on Seller Central as well. 

For all profit made, reporting it is essential, no matter if you received a 1099-K or not. You are exempted from this if you only sold a few household items for less than the purchase price.

  1. File Schedule C if there is a Business License 

Generally, the certificate is not essential before you can sell on Amazon. However, this is a requirement for a couple of states. The requirement for getting a business license is different for each state. However, a business with warehouses and employees in more than one state will likely need one. 

However, for someone simply having a one-person business from their home, they might not need one. Ensure you check the requirement of your state to stay clear of any mistakes. Bear in mind, however, that having or not having a business license does not affect the reporting of your income to Uncle Sam. 

  1. Take Care of Your Sales Tax

Many people might assume that the friendliest part of taxing as an Amazon seller is sales tax. This is prevalent with FBA sellers (fulfillment by Amazon) that engage Amazon's fulfillment centers in many states.


An Insight on Sales Taxes

Sales taxes are taxes on items classified as non-essential, and they vary from one state to the other. As a result, some states will tax clothing items, while others will only do so to a specific limit. 

This makes it essential for all state taxes to collect sales taxes for the government, depending on what you sell and the location of your sales nexus.

The requirement to File Sales tax

For you to collect sales tax, it is essential to apply for a sales permit. When you do, the state will give you a filing frequency: monthly, quarterly, or annually. 

This might seem complex to many people, but tax software can help make it easy, as you need to be on top of your sales tax throughout the year. 

  1. Keep Deductibles in Mind

Now to the juicy part, don’t forget your deductions. As a seller on Amazon, you are qualified to claim deductibles on stuff like education expenses and home office. Make sure to have receipts and other documents for your online activities.

Some deductions that Amazon sellers should take note of are:

  • Amazon fees

  • Donations like spoilt goods given to charity

  • The shipping cost of supplies

  • Mileage

  • Cost of goods sold

  • Subscription

  • Home office Costs 

  • Benefits and salaries for employees

  • Software for inventory and taxes

  • Consultancy fees like web designer, copywriter, lawyer, etc. 



Dennis Jao
Contact Member