How to File Taxes as an Amazon Seller

Navigating tax obligations as an Amazon seller requires understanding various financial and regulatory requirements. Self-employed individuals and small business owners operating on the Amazon platform face unique considerations. This guide provides an overview of key tax aspects for Amazon sellers.

Understanding Your Business Tax Status

An Amazon seller’s business structure directly influences tax filing requirements. Many sellers begin as sole proprietorships, a straightforward structure where the business and owner are considered the same entity for tax purposes. A single-member Limited Liability Company (LLC) often shares this tax treatment, with income and expenses reported on the owner’s personal tax return, unless an election is made for corporate taxation.

For businesses with multiple owners, a multi-member LLC is typically taxed as a partnership by default. This structure requires the LLC to file its own informational return (Form 1065), and each owner receives a Schedule K-1 detailing their share of profits or losses to report on their individual tax return. Alternatively, an LLC, whether single or multi-member, can elect to be taxed as an S-corporation, which can offer certain payroll tax advantages by allowing owners to be paid a reasonable salary and receive remaining profits as distributions.

Federal income tax applies to the net profit generated by the business, flowing through to the owner’s individual tax return for sole proprietorships and LLCs taxed as such. This ensures that business earnings are taxed at the individual’s applicable income tax rates.

An Employer Identification Number (EIN) is a unique nine-digit number assigned by the IRS to identify a business entity. While sole proprietors without employees or a qualified retirement plan typically do not need an EIN, it is required for partnerships, corporations, and LLCs. An EIN is used for various tax-related activities, including filing certain tax returns and opening business bank accounts.

Gathering Financial Records and Deductions

Effective tax preparation for Amazon sellers requires meticulous financial record keeping. Sellers must track all income sources, primarily gross sales, and account for deductions like customer refunds and Amazon fees. Amazon Seller Central provides various reports, such as Sales Reports, Transaction Reports, and Payments Reports, which are essential for compiling this income data and understanding charges incurred through the platform.

Thorough expense tracking is equally important, as legitimate business expenses can significantly reduce taxable income. Common deductible expenses for Amazon sellers include:
Cost of goods sold, representing the direct costs of acquiring products for sale
Shipping costs
Amazon selling fees
Advertising expenses for promoting products
Home office expenses
Supplies
Professional services like accounting or legal fees
Software subscriptions used for business operations

Amazon issues Form 1099-K, Payment Card and Third Party Network Transactions, to sellers who meet specific thresholds. For the 2025 tax year, Amazon will issue a 1099-K if gross payments processed through its system total $2,500 or more. This form summarizes gross payments processed but does not account for returns, fees, or other deductions. Sellers must reconcile the 1099-K information with their own records, as the amount reported may not reflect actual taxable income. Maintaining organized records, whether digital or physical, for at least three years from the tax filing date is standard practice for substantiating income and expenses.

Determining Your Federal Income and Self Employment Taxes

Amazon sellers determine their federal tax obligations using organized financial records. The primary form for reporting business income and expenses for sole proprietors and single-member LLCs is Schedule C (Form 1040), Profit or Loss from Business. This form details gross receipts or sales, followed by the cost of goods sold. After accounting for the cost of goods sold, sellers list various business expenses, such as advertising, commissions, rent, and utilities.

The net profit or loss calculated on Schedule C flows to Form 1040, the U.S. Individual Income Tax Return, becoming part of the seller’s total adjusted gross income. A business profit increases taxable income, while a loss may reduce it.

Self-employed Amazon sellers are responsible for self-employment tax, which funds Social Security and Medicare. This tax is calculated on Schedule SE (Form 1040), Self-Employment Tax. Net earnings from self-employment, derived from Schedule C, determine the self-employment tax. The self-employment tax rate is 15.3% on net earnings, consisting of 12.4% for Social Security and 2.9% for Medicare. Only 92.35% of net earnings from self-employment are subject to this tax, and half of the self-employment tax paid is deductible when calculating adjusted gross income on Form 1040.

Other federal forms might be necessary for specific situations. For instance, if a seller claims the home office deduction, Form 8829, Expenses for Business Use of Your Home, may be required to calculate the allowable deduction before transferring it to Schedule C. For significant asset purchases, depreciation forms might be needed to account for the expense over several years. These forms ensure all applicable deductions and calculations are properly reported.

Managing Sales Tax Obligations

Sales tax presents distinct responsibilities for Amazon sellers, separate from federal income and self-employment taxes. A central concept in sales tax is “nexus,” which describes a sufficient physical presence or economic activity in a state that obligates a seller to collect and remit sales tax. Physical nexus can be established by having a physical office, employees, or inventory stored in a state, such as through Amazon’s Fulfillment by Amazon (FBA) warehouses. Economic nexus, on the other hand, is triggered when a seller meets specific sales thresholds (either in terms of sales volume or number of transactions) in a state, even without a physical presence. These thresholds vary by state but commonly range from $100,000 in sales or 200 separate transactions annually.

Once nexus is established in a state, the seller is generally required to register for a sales tax permit in that state before collecting any sales tax. This registration is a prerequisite for legal sales tax collection and remittance. The process typically involves applying through the state’s department of revenue or similar agency.

Marketplace Facilitator laws mandate that Amazon, as the marketplace facilitator, is responsible for calculating, collecting, and remitting sales tax on behalf of third-party sellers for sales made through its platform in most states. This simplifies compliance for many sellers, as Amazon handles the tax for covered transactions. However, sellers may still have sales tax obligations in states where Amazon does not act as a marketplace facilitator, or for sales made through other channels outside of Amazon.

For sales where the seller remains responsible for collection, accurate calculation of sales tax based on the customer’s location and product type is essential. The collected sales tax is not business income; it is held in trust until remitted to the appropriate state tax authority. Sales tax remittance frequency varies by state and is often determined by sales volume, with common frequencies being monthly, quarterly, or annually. States assign a filing frequency upon registration, which may be adjusted based on subsequent sales activity.

Sellers must understand their unique sales tax obligations, especially if they sell through multiple channels or store inventory in various states. Even with Amazon collecting in many states, sellers need to monitor their sales to ensure full compliance with all state and local sales tax laws. Amazon Seller Central provides sales tax reports that can assist in tracking sales and collected taxes, which are crucial for reporting purposes, even when Amazon handles the remittance.

Filing Your Tax Returns

For federal income tax, sellers typically file Form 1040, which incorporates the business’s financial results from Schedule C and the self-employment tax calculated on Schedule SE. These forms can be submitted electronically through tax software, via a tax professional, or by mailing paper forms directly to the IRS. The general deadline for filing federal income tax returns is April 15th of each year for the preceding tax year, though an automatic six-month extension can be requested by filing Form 4868. It is important to remember that an extension to file is not an extension to pay; any taxes owed are still due by the original April 15th deadline to avoid penalties.

State income tax returns may also be required, depending on the seller’s state of residence and where the business operates. These state filings often align with federal deadlines but can have their own specific forms and requirements. Sellers should consult their state’s tax authority for precise filing instructions and due dates.

Sales tax returns are submitted to individual states where nexus has been established and where the seller is responsible for collection. These returns are typically filed through online state portals, though some states may still offer paper filing options. The frequency of sales tax filings varies widely by state, commonly ranging from monthly, quarterly, or annually, based on the volume of sales tax collected. Adhering to these state-specific deadlines is crucial to avoid late filing penalties.

Self-employed Amazon sellers are generally required to pay estimated taxes quarterly throughout the year, as income is not subject to employer withholding. These payments cover federal income tax, self-employment tax, and any other taxes that would otherwise be withheld. To calculate estimated payments, sellers project their annual income and deductions, then divide the total estimated tax liability into four installments. Payments can be made electronically through IRS Direct Pay or the Electronic Federal Tax Payment System (EFTPS), or by mail with Form 1040-ES payment vouchers.

Failure to pay enough estimated tax throughout the year, or paying late, can result in underpayment penalties. Generally, individuals can avoid this penalty if they owe less than $1,000 in tax, or if they pay at least 90% of their current year’s tax liability or 100% of their prior year’s tax liability (110% for higher-income taxpayers).