Key Points About Filing Taxes for Amazon Sellers
Are you Non-US Resident and doing business with Amazon? Or, Do you do dropshipping?
Are you wondering if you need to report your earnings from Amazon to the IRS? Here you might find answers to some of your questions.
The 1099-K Form
With this form, you provide IRS with monthly and annual gross sales information, including shipping fees and sales tax. Please note that you are not responsible for 1099-K Form if you are an individual seller. It is, instead of you, Amazon itself to provide the 1099-K to IRS and sellers.
To Whom Amazon Gives a 1099-K?
Amazon states that the sellers who meet both of the conditions below;
- $20,000+ in unadjusted gross sales, and
- 200+ transactions
*If you do not meet the criteria above, yet, are a professional/individual seller with 50+ transactions a year, you still need to provide Amazon with your tax information.
How to Get 1099-K on Amazon
To see the form on Amazon, you need to follow the following path: Seller Central – Reports – Tax Document Library.
Please note you will only be able to see the 1099-K if you meet the criteria mentioned above.
“I Don’t Receive a 1099-K Form on Amazon”
If you have made any kind of profit on Amazon, you need to report the income whether you get a 1099-K or not.
Make Sure the Figures Are Accurate
You can check the amount on the 1099-K by going to “Data Range Reports” page on Seller Central and following these steps:
Do You Have a Business License? File a Schedule C
Amazon does not necessarily ask for a business license from its sellers. Yet, some states may require you to obtain one. How do you know if you need one? The criteria all depend on the state. If you have employees, offices, and inventories in multiple states, you’ll probably need a business license. Or, if you are running a one-person-business out of your home, you probably won’t need a business license. Yet, it is your responsibility to check your state’s requirements to avoid any misunderstandings. You’ll still need to report income to IRS regardless of your requirement of a business license. If you don’t have a business license, and you want to get it in terms of your business needs while contacting us!
If you are conducting business in your state, you will be expected to file Schedule C, or Form 1040.
Most probably the most stressful part of filing taxes as an Amazon seller (especially if you are an FBA seller who uses Amazon’s fulfillment centers in various states).
What is the Sales Tax?
Sales tax is a tax on items for sale which are deemed non-essential. The list of items may depend on the state to state. For example, some states apply a tax on clothing whereas some others do not.
Regarding you are an Amazon seller, you need to collect sales taxes on behalf of your government (depending on the products you sell and the location of your business nexus).
What is a Sales Tax Nexus?
The definition varies from state to state. However, it is mostly defined as a place where there is a physical presence for your business. For example, if you have a home office in New Jersey and an inventory in Texas, you have a sales tax nexus in both. If your office is located in New York, but you have an employee in Pennsylvania you’ll need to collect sales tax in both states.
When to File Sales Tax
To collect sales tax in the state, you need to apply for a sales tax permit. The state will assign you a filing frequency, which might be monthly, quarterly or annually. Please check the due dates.
This may sound complex but there is some software to help you do the necessary work.
Amazon sellers and dropshipping users, like other self-employed individuals, can claim deductibles on some things. Do not throw away any receipts that can be related to your online activities. These deductibles can be the cost of goods sold, shipping costs, home office costs, mileage, Amazon fees, subscriptions, tax software, online advertising etc.
If you need help with a tax return, send us a message!