A guide to Amazon tax reporting for sellers

Tax season hits different when you’re an Amazon seller. Just when you think you’ve mastered inventory management and conquered the Buy Box, here comes the IRS with its maze of forms, deadlines, and requirements.

Amazon’s platform adds several layers of complexity to tax filing. From sales tax nexus spanning multiple states to distinguishing between taxable and non-taxable products, the learning curve is steep. 

But don’t worry. This guide breaks down everything you need to know to sail through tax season without breaking a sweat (or breaking the law).

Amazon sales tax

If you sell any physical item, you must calculate, add, and collect sales tax for every item sold. Whether you use Fulfillment by Amazon (FBA) or ship orders directly from your warehouse, you may have to collect sales tax in the states you’re shipping orders to. 

Sales tax varies by state, so keeping track of them when you sell in multiple states can be challenging. The general rule to remember is that if your business operates in a particular state—remotely or in a store—or you sell a taxable product, you’re responsible for collecting sales taxes.

Explaining sales tax nexus

Each state defines sales tax nexus differently. Generally speaking, a sales tax nexus is when your online business has a significant presence in a state where collecting sales tax is required. 

As an FBA seller, you may have a sales tax nexus in any or all of Amazon’s corporate offices and fulfillment centers. This includes all US states.

Amazon FBA is responsible for collecting and remitting sales tax for all states, but it would be best to verify that their system is correctly set up for your store. Amazon may charge sales tax for your untaxable items without the proper system configuration.

Each state collecting sales tax has varying rules about tax licenses and permits. If you have a sales tax nexus in any state, ensure that you’ve taken care of all the necessary permits and licenses. This will make tax filing easier and quicker.

Determining taxable products sold on Amazon

A product can be taxed at a lower rate or not at all, depending on where it’s bought. In states with no sales tax, consumers can purchase products without paying sales taxes. Meanwhile, some states tax items at a lower rate depending on their category. Food items, clothes, and other essentials are often taxed at a lower rate than other goods. 

Amazon collects and pays taxes on goods sold through its platform. However, you can set individual tax rates for particular categories and states. You can review your seller account’s settings to ensure that your items are appropriately taxed.

How to file taxes

It’s crucial to note that while Amazon collects and remits sales tax for you, it doesn’t file your income tax. You must take care of the necessary tax paperwork, such as your sales tax reports, the 1099-K tax form, and the 1040 Schedule-C to file your income tax.

It will be best to hire an accountant to help you file your income tax. Not only do accountants handle all computations, but they can also identify tax refund opportunities.

Now, let’s discuss how to file your taxes as an Amazon seller.

Access your sales tax report

Go to the Reports section of your Seller Central account and find the Tax Document Library. Head to the Sales Tax Reports and click Generate a tax report.

The system will generate three tax reports, namely: 

• Sales tax calculation report: A report showing the sales tax amount you must pay
• Marketplace tax collection report: A report showing all taxes Amazon has automatically collected and remitted
• Combined sales tax report: A report that covers data from the two documents above

1099-K Form

Amazon issues the 1099-K form to provide your gross sales data (monthly and annual) to the IRS. It also covers sales tax and shipping costs. Amazon will issue you this form if you have more than $20,000 in total sales and over 200 transactions.

If you’re an individual or professional seller who meets these requirements, you don’t have to fill out the 1099-K form; Amazon will do it on your behalf. It will send the filled-out form to you and the IRS. Note that if you have at least 50 transactions, you must still provide your tax status to Amazon.

You can provide this information through your Seller Central account. Carefully check every detail you enter to avoid mistakes, like misspelled words or incorrect or incomplete Tax Identification Numbers. This is crucial because errors in your entries could put your seller status at risk. 

How to download the 1099-K Form

If you meet the 1099-K requirements, Amazon should send the form to your email address (or mailing address). If you have yet to receive one but are certain that you meet the requirements, you can find the 1099-K form on your Seller Central account.

Click on the Reports menu, then select Tax Document Library. You’ll find the 1099-K form there, and you can download it. You can also contact Seller Support to receive the form.

How to address 1099-K form errors

It’s possible to see some mistakes in the 1099-K form that Amazon filled out for you. Follow these steps if you need to adjust some entries:

1. Double-check your total gross sales for the year. The amount should cover all the products you’ve shipped for the entire year. If you sold an item on December 31, 2024, but didn’t ship until January 2, 2025, its sales shouldn’t be counted.
2. If you need to recalculate your unadjusted gross sales for 2024, print a date range report. Click Reports on Seller Central and pick Date Range Reports. Click Generate a statement.
3. In the pop-up menu, select Summary as the report type and Monthly or Custom as the report range. Specify the exact range.
4. Click on Generate. You may have to wait an hour, so ensure that you’re not in a rush when completing this process.
5. When the date range report has been generated, review the entries carefully and add the amounts in the columns to recalculate your unadjusted gross sales for 2024.

(For sole proprietorships or solo LLC owners) Fill out Schedule C (1040 form)

While you can open an Amazon store without a business license, some states may require it. If you’re a sole proprietorship or solo LLC owner with a business license, you must file Schedule C along with Form 1040. 

Schedule C reports all business-related income and expenses, while Form 1040 is the standard IRS form used to file annual income tax returns. You may skip Schedule C if you have a different legal structure or if your Amazon store doesn’t have a business license.

But if you run a larger sole proprietorship or LLC with employees, offices, and significant expenses, you most likely need one. Therefore, you must file Schedule C.

Review your state’s requirements to ensure that you’re operating legally and filing your taxes correctly. Note that you must report your income to the IRS even if you don’t have a business license.

Identifying tax deductibles 

You can claim deductibles on expenses like shipping, supplies for your home office, and other operating costs. Gather all the receipts from your relevant business activities to quickly identify your deductibles.

Below are the potential deductibles:

• Amazon seller fees
• Cost of goods sold (COGS), including manufacturing costs or wholesale prices 
• Shipping-related costs
• Home office expenses, like computers, furniture, and office supplies
• Mileage
• Subscriptions
• Accounting, tax, Point of Sale (POS), and/or inventory management software fees
• Donations, like unsold or unsellable items donated to charities
• Advertising costs, like for ads, business cards, brochures
• Salaries and benefits
• Professional fees, such as payment for attorneys, accountants, copywriters, web designers, or business consultants
• Education costs related to ecommerce or online businesses

What happens if you don’t file taxes on time?

If you file your taxes late, the IRS may apply a late-filing penalty or failure-to-file penalty, which could be 5% of the tax you owe for each month or part of the month your filing is late.

If your tax return is over 60 days late, you may have to pay the penalty of at least $510 or the amount of tax you owe, whichever is smaller. The failure-to-pay penalty costs 25% of your tax bill at max.

Filing and paying your taxes on time is crucial to avoid penalties and secure your Amazon business. Even failing to provide your tax status to Amazon can put your seller status at risk.

You may be eligible for tax relief or penalty reduction if you meet certain requirements. For example, it’s your first time filing late, or you have a valid reason for missing the deadline. You can review the IRS website to discover how to apply for penalty relief.

How to get a tax extension

A tax extension grants you six more months to finish your tax return. If you don’t file your taxes by April, you can request a tax extension (Form 4868) on the date applicable to your legal structure. If you don’t file the form by Tax Day, your only option is to file and pay your taxes as soon as possible to minimize your penalties.

You can submit Form 4868 online or by mail on the tax-filing deadline. If you filed the form in April 2025, your tax filing deadline is October 2025. 

It’s essential to note that the tax extension doesn’t give you more time to pay your tax bill. Instead, it only pushes your filing deadline. If you’re unable to pay your tax bill, the IRS offers payment plans that allow you to pay off your balance in increments over time.

The tax extension is helpful if you’re missing important tax documents and need more time to gather them. Nonetheless, the IRS still expects you to submit an estimated tax payment by Tax Day. Aim to settle at least 90% of your tax bill by the deadline to dodge late payment penalties.

If you’re expecting a tax refund but need more time for filing, it’s still best to file a tax extension.

Making Amazon tax filing easier with InventoryLab Accounting

Keeping track of taxes on top of sales and expenses can be stressful. Thankfully, you can explore solutions that make the process more manageable.

A good example is InventoryLab Accounting. It’s not just another accounting software—it’s built specifically for Amazon sellers, with features tailored to the unique challenges of the platform. Unlike generic accounting tools, IL Accounting understands Amazon’s fee structure, fulfillment methods, and marketplace complexities right out of the box.

The real power comes from seeing your true costs instantly. When you’re preparing your taxes, InventoryLab gives you complete visibility into:

• Accurate inventory valuation at any point in time
• Detailed expense categorization for maximum deductions
• Perfect ROI calculations that include all Amazon fees

This real-time financial clarity means you’re not scrambling to gather tax information at the last minute. Your tax-ready reports are always available with just a few clicks, showing exactly what you’ve earned, spent, and owe.

For Amazon sellers who dread tax season, InventoryLab transforms the experience from a stressful paperwork marathon into a straightforward reporting task. Your accountant will thank you for providing such organized financial data, and you’ll likely discover deduction opportunities you might have otherwise missed.

Plus, InventoryLab Accounting is part of Seller 365, an all-in-one software bundle that combines 10 apps Amazon sellers need. Instead of paying separately for sourcing, accounting, repricing, and more, you get everything in a single subscription for just $69/month.

Ready to take the stress out of tax season? Try Seller 365 for free today and experience how easy managing your Amazon business can be.