Amazon Seller Taxes: 1099-K and Deduction Basics

1. Read This First

I sell on Amazon. I'm not a CPA, and this post isn't tax advice. It covers how the pieces fit together so you walk into your accountant's office with the right questions and the right paperwork.

Your situation depends on your state, your business structure and your numbers. Confirm every decision with a CPA or tax attorney before you file.

2. Amazon Income Is Taxable Income

Money you make selling on Amazon counts as business income. The IRS page on understanding your Form 1099-K says: "Whether or not you receive a Form 1099-K, you must still report any income on your tax return."

New sellers trip on this. They don't get a form, so they assume nothing is owed. The form is a reporting document. Your obligation to report exists without it.

3. When Amazon Sends a 1099-K

Form 1099-K is the form payment platforms and online marketplaces send to report what they paid you. Per the IRS page linked above, the federal reporting threshold is payments that exceed $20,000 in more than 200 transactions in a year. The same page notes you can still receive a 1099-K below that level.

Amazon's US Income Reporting and Tax Identity Collection FAQ confirms the same federal threshold and adds a warning: some states set a different reporting threshold than the IRS. Check your state with your tax professional.

The 1099-K shows gross sales, before Amazon takes its fees. Your taxable profit sits far below that number, which is why the records in the next sections matter.

4. The Tax Interview in Seller Central

Every seller on Amazon.com completes the tax interview, whatever their sales volume. Amazon's FAQ says so. The interview collects your taxpayer information and produces a Form W-9 (US persons) or W-8 (non-US persons).

For US sellers the tax ID is an EIN or a Social Security Number. Double-check every digit. Amazon's FAQ warns that misspellings and wrong numbers can invalidate the form.

If you plan to use an EIN, get it before you start the interview. The EIN and business bank account guide covers the setup order.

5. Gross Sales Are Not Profit

"You have to treat it that way. You have to know your numbers. If you don't know your numbers... you won't be successful in any business."

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A seller who did $60,000 in sales did not make $60,000. Between that figure and taxable profit sit the cost of the inventory you sold, Amazon's fees, prep, shipping and the tools you pay for.

Your CPA works from those numbers. If you can't produce them, you either overpay or guess, and both cost you. The FBA profit margin breakdown shows where the money goes on a typical sale.

6. Costs to Track for Your CPA

Your CPA decides what's deductible and how. Your job is to hand over clean records. For an arbitrage seller, the usual categories:

• Inventory cost: what you paid retailers, including the sales tax on the receipt
• Amazon fees: referral, fulfillment, storage, removal and any surcharges, all on your settlement reports
• Prep center invoices and shipping to the prep center or to Amazon
• Software subscriptions for sourcing, repricing and bookkeeping
• Supplies if you prep yourself: labels, boxes, tape, poly bags

Inventory still sitting unsold at year end gets different tax treatment from inventory you sold. Ask your CPA how they want your ending inventory counted, and pull the number from Seller Central on December 31 instead of reconstructing it in March.

Amazon's fee list changes. The FBA fees explained guide breaks down the current fee types so you can match them to your reports.

7. Receipts and Sales Tax You Paid

"Enter your sales tax for whatever you're going to pay..."

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Sales tax you pay when you buy inventory is part of what that inventory cost you. Put it in your profit calculator when you source, and keep the receipt that shows it.

Save order confirmations as you buy. Retailer accounts close, emails get deleted, and you'll need those invoices again for ungating appeals and authenticity complaints too. One folder per month works fine.

8. Use Software, Not a Shoebox

A profit tracker pulls your Amazon sales, fees and refunds on its own. You add the cost of each unit and it gives you a profit-and-loss report your CPA can read.

I compared two of the common options in InventoryLab vs Sellerboard, and there's a full Sellerboard review too. Pick one and log costs weekly. A year of catch-up in April costs more in your time than the subscription.

Keep business money in a business bank account. Mixing personal and business spending is the fastest way to turn a two-hour CPA meeting into a two-week project.

9. Estimated Taxes

Nobody withholds tax from your Amazon payouts. If you expect to owe, the IRS may expect payments during the year instead of one bill in April. Your CPA can tell you whether estimated payments apply to you and how much to set aside.

Until you have that number, park a share of each payout in a separate savings account. Treat it as money that belongs to the government and don't buy inventory with it.

10. Sales Tax Is a Separate Topic

Income tax and sales tax are two different systems. Income tax applies to your profit. Sales tax applies to what buyers pay on each order, and Amazon collects and remits it in many places as the marketplace.

That second system has its own rules about where you owe and whether you need to register with a state. It depends on nexus, the connection a state says you have with it, and it deserves its own conversation with your CPA.

11. Questions to Bring Your CPA

• Should I report under my name or a business entity, and does an LLC change anything for me?
• How do you want ending inventory counted?
• Do I need to make estimated payments this year?
• Does my state have its own 1099-K threshold or filing rules?
• Which reports from Seller Central and my profit tracker do you want?

For the entity question, start with LLC vs sole proprietor for Amazon sellers. Want to see how I run the numbers on a product before I buy? Join Thursday's free training.

12. Next Steps

Five posts that pick up where this one stops:

• How to Start Amazon FBA - the full setup path, taxes included
• EIN and Business Bank Account - separate your money before tax season
• LLC vs Sole Proprietor - the structure question to bring your CPA
• InventoryLab vs Sellerboard - pick a profit tracker that gives your CPA clean numbers
• Amazon FBA Profit Margin - what's left after fees, before taxes