Once your Amazon store is profitable enough, it’s a good idea to start thinking about taxes. Whether you’re a seasoned seller already closing in on the tax threshold or a new seller getting ahead of the curve, learning about taxes can be a daunting prospect.
This guide is here to walk you through everything you need to know about taxes related to selling on Amazon, from the kinds of taxes you may need to pay to how you can file them. This way, you can stay tax-compliant and avoid paying unnecessary fines.
However, note that TraceFuse does not provide tax or accounting advice. This article is purely for informational purposes, and I highly recommend that you consult with certified accountants and tax professionals to learn more about what you read here.
The Basics of Amazon Seller Taxes
Seller taxes include all federal, state, and local taxes that are charged to Amazon sellers. Generally, taxes that an Amazon seller must pay fall into these three types:
- Income tax: This is a tax levied on your net taxable income, including your Amazon sales proceeds and other sources of income, reduced by your tax deductions.
- Sales tax: This tax is charged on every sale you make on Amazon. In most states, Amazon automatically collects this tax on your behalf.
- Self-employment tax: If you’re an individual seller, you must pay the self-employment tax to cover Social Security and Medicare.
Aside from the three main tax types, you may also encounter the following taxes:
- Excise tax: You may encounter this tax if you sell regulated products like tobacco and alcohol.
- International taxes: If you sell products in other countries, you may be subject to additional taxes valid in those countries, such as VAT or GST.
Value-Added Tax (VAT) for International Amazon Sellers
VAT is a consumption tax added at each stage of the supply chain and ultimately paid by the customer. Unlike U.S. sales tax, which is typically collected only at the final sale, VAT is built into product pricing and must be tracked and reported by registered businesses.
For Amazon sellers, VAT obligations usually arise when you:
- Store inventory in another country through FBA
- Sell directly to customers in the UK or EU
- Import goods into international Amazon marketplaces
Even U.S.-based sellers can trigger VAT requirements simply by enabling international fulfillment or sending inventory overseas. Understanding when VAT applies is essential, as failing to register or file correctly can lead to penalties or marketplace restrictions.
Important Tax Dates
Businesses must file taxes by certain dates every year. For Amazon sellers, these are the most important dates based on the 2025 tax season:
- March 17: Deadline for filing Form 1065 (Partnership returns) and Form 1120-S (S-Corporation returns).
- March 31: Deadline for submitting 1099 forms with Form 1096.
- April 15: Deadline for Individual Income Tax Returns and C-Corporation Tax Returns (Form 1120).
These tax deadlines are generally consistent, but they may move slightly if the dates fall on a weekend.
Taxes When Selling on Amazon Internationally (UK & EU)
Expanding into international Amazon marketplaces introduces additional tax responsibilities beyond U.S. income and sales taxes. The UK and EU operate under VAT systems, and sellers may be required to register before making taxable sales.
You may need VAT registration if you:
- Store inventory in an EU or UK fulfillment center
- Use Pan-European FBA or remote fulfillment programs
- Exceed country-specific distance selling thresholds
- Import goods into another country as the seller of record
In many cases, storing inventory abroad automatically creates a tax obligation even if your business has no physical office there.
Amazon may collect and remit VAT on certain transactions depending on marketplace facilitator rules, but sellers are still typically responsible for registration, filings, and maintaining compliant records.
Because VAT rules vary by country, sellers expanding internationally should confirm requirements before shipping inventory overseas. Planning ahead helps prevent listing interruptions and unexpected compliance issues.
Do I Need an Accountant to Help With My Taxes?
Whether or not you need an accountant for tax assistance depends on how comfortable you are filing Amazon seller taxes yourself. If you’re unsure of what you’re doing or feeling overwhelmed, you may need to seek the help of an accountant.
Common Tax Mistakes Made By Amazon Sellers
We understand that taxes can be confusing and mistakes can happen. To help you identify and prevent those mistakes from happening, we’ve compiled a list of the most common tax mistakes made by Amazon sellers.
Failing to Register Sales Tax
Neglecting to register for sales tax in states where you have a tax obligation is one of the more common mistakes made by Amazon sellers. If you use FBA, your inventory can be stored in multiple states, so it’s important to determine the states where you have a tax nexus and register for sales tax permits there.
Business Misclassification
Even if you started as an individual seller or sole proprietor, chances are your Amazon business won’t stay that way. Classifying your business properly can confer extra liability protection or reduce self-employment taxes, so misclassifying your business can cause you to lose out on various perks. If you’re confused about which business type to classify your store as, talk to a tax professional.
Incomplete Bookkeeping
Accurate and complete bookkeeping is crucial for tax compliance. If you can’t track your income, expenses, and deductions, you’re prone to errors during tax season, which might bring unwanted attention from the IRS. Consider using accounting software or hiring a bookkeeper to keep your finances organized.
Overlooking Deductibles
Deductibles are a great way to reduce your taxable income, and you’re missing out if you overlook them. Keep detailed records of your business transactions and learn what kinds of tax deductions you’re eligible for.
The Amazon Seller Tax Form 1099-K
The 1099-K form is one of the essential Amazon seller tax documents. This form details the total value of sales and transactions that went through a third-party organization, which in this case is Amazon. Depending on your sales activity, you may receive one or both of the following forms from Amazon:
- 1099-K, which reports your gross payment processing volume.
- 1099-MISC, which reports non-sales income.
According to the IRS 1099-K guide, you’ll receive a 1099-K from Amazon if you exceed, as of the 2024 tax year, $5,000 in payments received through Amazon. The IRS plans to reduce the threshold to $2,500 for the 2025 tax year.
Getting the 1099-K Form From Amazon
Amazon usually provides you with the 1099-K forms by January 31st if you meet the payments processed threshold. Once you get the form, you can access it through the Reports menu of your Seller Central.
Collecting Sales Tax on Amazon
As we’ve covered before, Amazon collects sales tax on the products you sell on its platform. Depending on where you are, there are two ways Amazon can collect your sales tax.
Amazon Marketplace Facilitator Tax
In most American states, the marketplace facilitator tax (MFT) requires Amazon to collect and remit sales tax, so you don’t need to collect it by yourself. However, you’re still responsible for ensuring the collected taxes are accurate and in compliance with all the relevant laws. According to Amazon’s marketplace tax collection page, 48 jurisdictions have enacted MFT legislation.
Manual Sales Tax Collection
Per Amazon’s marketplace tax collection page, Delaware, Montana, New Hampshire, and Oregon aren’t MFT states. If you have a sales nexus in any of these states, you need to collect and remit sales taxes yourself. A sales nexus happens if you have a physical presence in the area or exceed a certain sales threshold (determined by transactions or sales value).
For states that require you to collect sales tax manually, you need to configure your Amazon seller account to collect tax at the appropriate rate.
What Tax Deductions Can I Claim?
As an Amazon seller, you can reduce the taxes levied on your business through tax deductions. These deductions usually come from the many expenses of running a small business. Let’s take a look at some of the more common tax-deductible expenses you may encounter:
- Cost of goods sold: Cost of goods sold (COGS) includes expenses like labor and production costs that allow you to create products for your customers.
- Storage fees: Whether you’re storing your products in an FBA fulfillment center or a third-party warehouse, you may be eligible for tax deductions for the storage costs.
- Home office and office supplies: If you run your Amazon store from home and have a home office dedicated to it, you may be eligible to get deductions on your home office costs.
- Shipment costs and packaging materials: Shipping and handling costs to get your products to customers may be eligible for tax deductions. The costs of acquiring packaging materials may also be deductible if you handle shipping yourself.
- Business software and subscriptions: Subscriptions and purchase costs for technology like business software and web hosting are generally tax-deductible.
- Marketing and advertising expenses: Marketing and advertising are often the most expensive things associated with doing business. Fortunately, these costs can be put in as tax deductibles. Note that it’s not just the expenses associated with putting up online ads, but you can also deduct designer and copywriter fees.
- Professional services: If you hire lawyers, accountants, video editors, or any other professional service providers, the costs associated with their services may be tax-deductible.
- Banking and business costs: Costs associated with banking, such as maintenance fees and transaction fees, are generally tax-deductible.
- Education expenses: Online classes associated with your Amazon selling efforts may be tax-deductible. You can also deduct magazine or periodical costs, as long as they directly relate to your area of business.
- Business travel: Most travel costs for business reasons are tax-deductible, as are any costs associated with vehicle use for business-related activities.
Some of these tax-deductible areas can be challenging to track, such as the amount spent on business activities using your car. If you’re worried about the IRS taking a microscope to your financial records, consult with an accountant to learn which parts of your business expenses are safe to deduct.
Top Tax Tips for Amazon Sellers
While tax season only comes once a year, taxes can be confusing and often frustrating for many Amazon sellers. To help soften the blow, we’ve compiled the following tips to make the next tax season easier.
Keep Complete and Accurate Records
As a seller, you probably make dozens, if not hundreds, of transactions every day. Keeping track of all these sales and expenses is essential for tax compliance. You can use accounting software like QuickBooks or hire a bookkeeper to keep track of all your transactions.
More importantly, you shouldn’t put off bookkeeping for the end of the year. You can do it on a monthly basis, so you don’t have to spend hours upon hours when tax season is close.
Ensure You’re Tax-Compliant in Nexus States
As per Amazon’s MFT page, there are four states where the platform doesn’t collect taxes automatically. You need to apply for sales tax permits and file sales tax returns if your store has a presence in these states, as well as if your sales exceed the sales tax threshold.
Keep Track of Your Deductibles
Remember that most business expenses can be included as tax write-offs at the end of the year. Always keep a close eye on your business expenses and mark which ones can be used as deductibles so you don’t overpay on your taxes in the upcoming tax season.
Pay Estimated Taxes Quarterly
Doing your taxes each year can take a considerable amount of time. Instead of spending hours upon hours near the tax deadline, it’s a good idea to sit down and pay taxes on a quarterly basis. In fact, in some cases, you may be required to pay these quarterly estimated taxes.
Ask for Help From Tax Professionals
Taxes can be confusing, so don’t be afraid to get help. Advice and guidance from tax professionals or Amazon seller accountants can go a long way to ensuring tax compliance and helping your store stay off the IRS’s radar. While professional help may result in extra costs, it’s usually worth it for the peace of mind you’ll get.
Key Takeaways
Amazon sellers generally pay three main types of taxes: Income tax, sales tax, and self-employment tax. Neglecting your tax obligations may result in penalties or legal consequences from the IRS, and you don’t want that stress on top of your workload running your store. Fortunately, you can seek the help of professional tax advisors if you’re confused.
Aside from taxes, another issue that often causes headaches for Amazon sellers is fake reviews. Sometimes, you’ll get reviews that serve only to tarnish your store’s reputation. Fortunately, TraceFuse is here to help with AI-powered tools that can find and report those reviews for removal within days. Book a demo with us today to learn more about our services.
