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Amazon offers tremendous opportunities to online sellers. Selling products on Amazon allows e-commerce businesses to take advantage of the extended reach and brand awareness that Amazon generates. When an individual decides to start selling their products on Amazon, they may be unaware of the taxes associated with selling products on Amazon. Taxes can be quite confusing all on their own. Complicate that by throwing in sales tax, and self-employment tax and you have a real recipe for disaster. Seeking guidance from a tax professional is the best way to make sure you are meeting all of your tax obligations, but also not leaving any money on the table with deductions. Here are some important Amazon e-commerce tax tips to consider.
What Is The Amazon 1099-K Tax Form?
The 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 will automatically be there. If not, you should contact Seller Support.
Who Receives An Amazon 1099-K Tax Form
Amazon issues 1099-K forms to sellers who have 20 K in sales and 200 transactions in a year. If you don’t meet the criteria but have at least 50 sales, you must report your income to Amazon, so they can be in compliance with the IRS. Failure to do so could result in a suspension of your seller status.
An important Amazon e-commerce tax tip is to make sure your 1099-K is accurate. When filing taxes, it is extremely important to make sure your tax forms have the correct information. The number reported on your 1099-K must match the number you report in your taxes. This is to avoid any unnecessary penalties from the IRS. Be sure to cross reference the amount reported on your 1099-K form with the numbers from your sales report. To run your sales report in Amazon you can follow these steps:
1- Select payments from the reports tab in Seller Central.
2- You can specify dates by selecting date range reports.
3- Generate statement.
Remember, reports can sometimes take up to an hour to generate. If it doesn’t generate right away, wait a little bit, then try again.
What Qualifies As Income? What Deductions Can I Claim?
For the most part, any time goods are sold on Amazon it will be 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. However, when you start purchasing items to resell on Amazon and it starts looking more like an ongoing auction, then the income needs to be reported.
Deductions are an important Amazon e-commerce 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
Staying on top of sales tax, paying self-employed tax, and knowing whether or not you are required to file a schedule C are other important Amazon e-commerce tax tips. Working with a tax professional can help make sure you are meeting all of your tax obligations and maximizing deductions. For more Amazon e-commerce tax tips sign up for our newsletter here.
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