Amazon Seller Taxes: What You Owe and How to Not Get Surprised

Tax season surprises Amazon sellers every year, and they're almost always avoidable. The problem isn't that Amazon taxes are complicated; it's that most sellers don't deal with them proactively until they're already behind. Here's what you need to know.

Income Tax: What You Owe as an Amazon Seller

Amazon seller income is taxable. Whether you operate as a sole proprietor, LLC, S-corp, or C-corp, your net profit from Amazon sales is subject to federal and state income tax.

For sole proprietors and single-member LLCs, Amazon income is reported on Schedule C of your personal tax return. You'll also owe self-employment tax (15.3% on the first ~$168,600 of net self-employment income in 2026) on top of regular income tax.

Structuring as an S-corp can reduce self-employment tax once you're consistently profitable, worth discussing with a CPA once you're past $80 to 100k in net profit.

The Key Deductions Amazon Sellers Miss

• Amazon fees, referral fees, FBA fees, storage fees, advertising costs are all deductible
• Cost of goods sold, your inventory cost, including landed cost
• Home office, if you use part of your home exclusively for business
• Software and tools, repricing software, listing tools, accounting software
• Professional services, bookkeeper, accountant, attorney fees
• Shipping supplies, boxes, tape, labels, poly bags
• Returns and write-offs, unsellable returned inventory

Sales Tax: The Post-Wayfair Reality

Since the 2018 South Dakota v. Wayfair Supreme Court ruling, online sellers have economic nexus obligations in states where they exceed sales thresholds, even without a physical presence there.

Most states trigger nexus at $100,000 in annual sales or 200 transactions. Amazon's Marketplace Facilitator laws mean Amazon collects and remits sales tax on your behalf in most states. But this doesn't mean you're off the hook, you may still have nexus from your own direct sales (Shopify, your own website) in those same states.

Quarterly Estimated Taxes

If you expect to owe more than $1,000 in federal tax for the year, you're required to pay quarterly estimated taxes. The due dates are April 15, June 15, September 15, and January 15.

Missing estimated payments results in underpayment penalties. A good rule of thumb: set aside 25 to 30% of net profit each month for taxes.

1099-K from Amazon

Amazon issues a 1099-K if you process more than $600 in gross payments in a calendar year (the threshold dropped from $20,000 in 2023). This form reports gross sales, before fees, returns, or refunds. Your actual taxable income is much lower. Make sure your bookkeeper reconciles your 1099-K against your actual P&L before filing.

Year-End Tax Prep Checklist

• Reconcile all Amazon settlements for the year
• Calculate accurate COGS with inventory valuation
• Gather 1099-K from Amazon Seller Central
• Document all deductible business expenses
• Review home office or vehicle use if applicable
• Confirm quarterly estimated tax payments made