While books and balance sheets are the lifeblood of your business, you may dread thinking about these things! Often FBA sellers don't consider accounting and bookkeeping until the time comes to pay taxes. Don't make that mistake!
Here are the tax tips you need to know for being an Amazon FBA seller.
Start On A Solid Foundation
If you are just starting your Amazon business, setting up a solid accounting foundation is more important than you think.
Good habits are built early. We recommend FBA sellers develop an accounting system that will be easy to scale as the business grows. For that reason, even though excel spreadsheets or accounting software solutions may work at the start, as your FBA business is growing, you'll find that manual data entry isn't sustainable.
Sellers who spend hours on manual data entry reported a negative industry outlook because it affected their productivity in other areas of the business. An accounting tool, expert (or both!) can help here.
Use An Accounting Tool
If you're looking to make selling on Amazon a business, find accounting software that goes beyond basic bookkeeping. Give us a call to discuss your specific situation so we can help point you in the right direction.
Plan For Income Taxes
Let's start with the basics - income tax. Income tax is calculated by finding the adjusted gross annual income. Then subtracting any adjustments, calculating liabilities, and applying credits.
The rate you pay for income tax depends on what tax bracket you are in. On average, most Americans fall within the 22% – 32% income tax brackets.
Identify Your Income
Almost any time products are sold on Amazon, it is considered income that needs to be reported. With one exception.
If you use Amazon to host a virtual garage sale, where you sell household items for less than you paid for them, it doesn't need to be reported.
But, when you start purchasing items to resell on Amazon, and it starts looking more like an ongoing auction, the income needs to be reported.
Insider Tip: Find Your 1099-K Form
A 1099-K form is a tax form that reports your monthly and annual gross sales information to the IRS. It also includes information like sales tax and shipping costs. Amazon issues 1099-K forms to both sellers and the IRS.
You can access your 1099-K form in Seller Central. From there, select reports, then tax documents. If Amazon issued a 1099-K, it would automatically be there. If not, you should contact Seller Support.
Include Sales Tax
Online sellers also have to pay sales tax. For sales tax, e-commerce sellers are treated just like all other online retailers.
As an FBA seller, you are required to collect sales tax in states where your selling meets two criteria:
Sales tax nexus
Product taxability
Look For Deductions To Claim
Deductions are an important FBA seller tax tip because they can help lower the amount you owe. As an e-commerce business, there are many deductions available. Some common deductions that may be available to you include:
Cost of Goods Sold
Amazon fees
Home office costs
Utilities
Shipping costs
Travel expenses
Education
Subscriptions
Mileage
Marketing
Costs of maintaining a website
Ask For Help From An Expert
Organizing your finances for your Amazon business might seem intimidating at first. But if you set up the proper systems, it'll make your life easier in the long run (especially at tax time!)
Are you spending too much time on administrative upkeep and not focusing on your business? Then it could make sense to outsource for some help.
Focus on your business, not your books
When it comes to taxes, having a professional handle your taxes makes a huge difference in your FBA seller business.
When you trust Fidelis Tax & Accounting, we serve you and your business. Together we can develop a plan and win at business. So each day, when you go to work, you can feel confident, connected, and calm that you're informed about your finances and have a plan to reach your business goals.