Posted by KLSM CPA Firm PLLC

Important Things Amazon Sellers Need to Know About Filing Taxes

Important Things Amazon Sellers Need to Know About Filing Taxes

You might be a professional seller on Amazon, or you disposed of a couple of personal items, it is essential to know how to report such earnings to Uncle Sam when it's tax season. 

This article will shed light on what is expected of you as you prepare to file your taxes:

  1. Get Familiar With Form 1099-K

Form 1099-K is a form used to report sales that furnish Uncle Sam monthly alongside annual gross information on sales. It includes shipping fees alongside sales tax. Individual sellers online are not supposed to fill the 1099-K, but Amazon will fill it and provide a copy to you – the seller and Uncle Sam.

 

Who gets 1099-K from Amazon?

Amazon reports that sellers that meet the two conditions below will get a 1099-K form by the last day of Jan. 

  • Unadjusted gross sales 

  • Transactions over 200

You might be an individual or a professional seller on Amazon without meeting the criteria above, but you had 50 transactions; Amazon will still need your tax info if you do not want to lose your status as a seller. 

While this isn’t Uncle Sam’s requirement, Amazon wants to have the tax information of all their sellers to ensure compliance with IRS regulation.

  

People that didn’t get a 1099 k from Amazon

As long as you believe you satisfied the conditions stated above, Amazon didn’t provide you with a 1099k, and it is not on Seller Central, get in touch with Seller Support. You need to report all profits made on Amazon regardless of whether you got a 1099 or not. 


  1. Have a Business License, File a Schedule C

A business license is not required for you to sell on Amazon, though it is compulsory in some states. To get a business license, make sure to check the requirement for the same state. You will likely need one if you have offices, employees ad inventories in series of states. 

On the other hand, people simply running a proprietorship business from their home might not need one. Make sure you are aware of what you state requires to avoid errors. 

However, the possession of your business license does not influence your tax reporting. For people opening a business in their state, they need Schedule C, Form 1040.

 

  1. Get Your Sales Tax in Order 

Probably the most tedious part of dealing with taxes as a seller on Amazon is Sales tax. This is especially a task for an FBA (Fulfillment by Amazon) seller that employs Amazon’s fulfillment center in various states. 


An Insight into Sales Tax 

Taxes on Items for sale classified as non-essential are called sales tax which varies from one state to the other. As a result, a couple of states will not tax clothing while others will. 

Amazon Sellers will need to keep sales taxes for the government, which is a factor of what you sell and the location of your sales nexus. 


Sales Nexus Tax

The definition of a sales nexus differs from one state to the other. However, many states agree that this is where your business has a physical location. So with this, if your home office is in Idaho while your inventory is located in South Dakota, you will have a sales tax nexus in both Idaho and South Dakota. 

For all the states in which you have a nexus, you need the buyers to give you sales tax. The individual district will report those taxes to Uncle Sam.


  1. Keep Your Deductions in Mind 

Not everyone loves the idea of paying taxes. Still, luckily, Uncle Sam gave some legal means to reduce what we pay. Like many self-employed, it is possible for Amazon sellers to claim deductions for home office expenses, business trips, education expenses, etc. Make sure to keep all receipts related to such activities. 

Some necessary deductions you can claim are:

  • Amazon fees

  • Subscriptions

  • Costs of goods sold like the cost of manufacturing.

  • Donations like goods given to charity

  • Employee benefit and salary

  • Software for inventory and taxes

  • Consultant fees for a web designer, accountant, content writer, etc

  • Education related to online commerce



FOR MORE INFORMATION ON HOW KLSM, CPA FIRM, PLLC. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


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