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This is a complete guide on top tax write-offs (deductions) for Amazon FBA business.

In this guide, you will learn:

  • An overview of Amazon FBA business deductions
  • Top 14 deductions for Amazon FBA business
  • An overview of the Amazon Tax Exemption Program (ATEP)
  • Amazon tax deduction tips
  • If you are an Amazon FBA business owner and want to get the details about the Amazon FBA write-offs, this guide is a must-read for you.

    Continue reading….

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    CHAPTER 1

    An Overview Of Amazon FBA Business Tax Deductions

    Everyone dislikes filing taxes if there is one thing that Amazon business owners can agree on. The good news is that many small business operating costs can actually lower your overall debt.
    Tax Deduction = A Relief For Amazon FBA Business Owners
    In this chapter, we will learn what exactly tax deductions are.
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    What expenses of my Amazon business are tax deductible?

    Tax law stipulates that a business expense is only deductible if it is both typical and required. Why does that matter?

    Regular / Ordinary company expenses are ones that you and other businesses in a similar industry would incur on a regular basis. In essence, this means that any tax professional would consider it reasonable and accept it.

    Necessary business expenses that are suitable and helpful to your operations are considered necessary. However, it need not be a case of need vs want; expenses can still be required even if your company could function without them.

    Keep all of the receipts linked to your business throughout the year because there are so many expenses that professional Amazon sellers may be able to deduct from their taxes. If you have your receipts on hand for your CPA to review, you may make sure you can deduct every dollar you possibly can.

    CHAPTER 2

    Top 14 deductions for Amazon FBA business

    Being an internet seller, especially when it comes to taxes, requires a lot of work, vigilance, and even risk. Selling on Amazon.com can be financially profitable, but there are risks involved as well.
    However, there will also be a considerable benefit to becoming an Amazon or e-commerce vendor thanks to tax deductions.
    Sellers on Amazon.com and other platforms can actually deduct a variety of expenses, such as fees for your home office, education and training, and a plethora of other charges, just like any other self-employed person or a business owner.
    In this chapter, we will learn about the top 14 tax deductions for Amazon FBA businesses.
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    Tax Deductions For Amazon FBA Businesses

    • Cost Of Goods Sold
    Unless this is your first year paying business taxes, you are aware that the IRS enables you to deduct your Cost of Goods Sold, or COGS, from your taxes. These are the expenses you have to make in order to provide your customer with a health or wellness product.

    You could mention stuff like:

    • Labor expenses of production
    • Cost of goods at wholesale that you're reselling Storage
    It's crucial to understand what your COGS consists of because it depends on your accounting approach. By double-counting expenses, you run the risk of having to defend your actions to your CPA or, worse, the IRS.

    • Storing Your Amazon Inventory
    Storage is one expense to pay attention to. Do you store your Amazon products yourself or do you ship the majority of your inventory to Amazon fulfillment centers? Any storage costs you incur are tax deductible.

    • Your Home Office
    While we're talking about home storage, it's important to think about if your home office qualifies for a tax break. Do you fit these criteria?

    • You work from home to operate your Amazon business.
    • Your workplace at home is a separate room.
    • You solely conduct business out of that home office.


    You might be in luck if so! Discuss potential tax deductions for things like mortgage interest, insurance, depreciation, and continuing house expenses with your CPA or a tax expert. However, there can be some ambiguity regarding the use of your home for business, so make sure to read IRS Publication 587.

    • Shipping Your Amazon Products
    If you run an Amazon business, you can choose to handle order fulfillment through Seller Central or through Amazon FBA. In any case, you can deduct the cost of shipping your goods to a customer who wants them from your taxes.

    Similar to how you can deduct the expenses Amazon charges for keeping your inventory, if you use Amazon FBA, you can also deduct the fees Amazon charges for managing your goods.

    Make sure you keep track of all of your expenses if you ship Amazon products yourself or if you also sell on your own website. Do not overlook the following.

    • Delivery fees
    • subscriptions to postage meters
    • unnecessary postage
    Additionally, all of the shipping-related goods you use may be eligible for a tax deduction.

    • Packaging And Materials
    For an Amazon firm, the cost of boxes, envelopes, tape, and those plastic bags with air inside may quickly pile up. Keep track of each of these expenses, particularly:

    • Envelopes and labels
    • Printing expenses
    • Boxes, envelopes, and other packaging supplies
    • Adhesives and tapes
    • Markers, inserts, and any other shipping-related items
    • Office Supplies
    Even if Amazon handles the storage and shipment of your product, you'll still need to keep track of some of these costs. Many of these items will be deducted as office supplies in its place if you only use Amazon FBA.

    • Software And Technology
    Possess you a website? Do you pay for CRM, Microsoft Office, or even time tracking? These seemingly insignificant monthly software license payments build up. Don't overlook tax deductions such as:

    • Licenses for website software, as well as the cost of your domain
    • Web hosting costs
    • Add-ons, themes, and plugins
    • Plans for graphic design or photo subscriptions
    • Email is used.
    • Office applications such as word processing and spreadsheets
    • Amazon software for advertising, reporting and buyer-seller messaging
    • Accounting and business software
    • Payroll application
    • Program for making videos and editing photos
    • Communication
    Additionally, create a category for communications tools while you're calculating the cost of the software you purchased throughout the year. This includes your cell phone, as well as access to the internet, the phone, and online conferencing tools like Zoom or Skype.

    Consult your CPA or tax expert if you don't have specific lines or accounts specifically for company use. You want to be careful not to overstate the deduction you can claim for something that keeps both your social and professional life thriving.

    • Professional Services
    What is a 1099 contractor, you ask? If you've been doing everything yourself up until now, it's time to start turning to professionals—and lower your tax burden in the process. However, you should accurately track everyone you pay for counsel or work, including:

    • Accountants, tax professionals, and CPAs Lawyers for businesses
    • Advertising specialists, website designers, and marketing consultants
    • Photographers to capture your goods
    • video producers
    • Temporary workers or virtual help
    • Mechanics for your storage or workplace (perhaps even your home office!)
    These types of experts are available as contractors or as corporate services. These are several tax circumstances that call for various forms of paperwork.

    • Bank And Business Fees
    In addition to the professionals in your wallet, there are undoubtedly other costs associated with conducting business. This might comprise:

    • Fees that you pay to banks to keep your account open
    • Processing charges for transactions made on your website or elsewhere outside of Amazon
    • Membership dues or credit card fees Business insurance (or possibly your own health insurance as a self-employed person)
    Keep the receipts for any additional fees or premiums you pay to keep your firm operating. They are likely inferences.

    • Education
    Do you attend Prosper Show annually? Did you sign up for a paid Amazon Mastermind group? Are you learning how to advertise on Amazon using online courses? The good news is that all of these expenses would be tax deductible. This includes any training or program that has a direct bearing on how your Amazon business functions on a daily basis. Keep the trip receipts as well, as those are also tax deductible.

    You might be able to write off the expense of your magazine subscription or digital publications if you want to read your way to a better Amazon business. These must, however, be unique to your field of health and wellbeing; general business journals are not acceptable.

    • Business Travel
    If you travel for the purpose of furthering your education or conducting business, you are probably aware that the majority of those costs are tax deductible. There are some possible pitfalls, though.

    • Vehicle Usage
    You must carefully determine how much of your vehicle usage was related to the business unless you have a vehicle that is used only for that purpose. You can accomplish that anyway:

    keeping meticulous records of all the miles you traveled, noting the dates you did so, or Keep the receipts for the money you actually spent on things like gas, oil changes, and upkeep while operating your car.

    Discuss your unique scenario with your CPA because this is another area where the IRS may be picky.

    • Business Meals And Entertainment
    You might be tempted to pay the bill while you're traveling, but you should be aware that just 50% of these expenses are often tax deductible. Additionally, the IRS also keeps an eye on them.

    If you plan to write off these costs, be prepared to do so with supporting evidence, such as:

    • The cost in dollar terms
    • The expense's location and the date it was incurred (restaurant, venue, etc.)
    • The reason you're having fun (why you were entertaining)
    • Information about your companions during the activity
    In order to avoid needless scrutiny, you should always speak with your tax advisor or CPA if you have any queries regarding these charges.

    CHAPTER 3

    An Overview Of Amazon Tax Exemption Program (ATEP)

    Purchases made by people or companies may be tax-exempt. For purchases made from sales made by Amazon, its affiliates, and participating independent third-party sellers, our Amazon Tax Exemption Program (ATEP) supports tax-exempt transactions.
    You can enroll on your own using the self-guided approach provided by the Amazon Tax Exemption Wizard.
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    Go to the Tax Exemption Wizard

    Ensure you have all the information required for enrolment.

    • State or territory you desire to register in Type of entity your organization is
    • Companies address
    • Numbers or forms for exemptions (if applicable)
    For program enrollment, Amazon does not accept articles of incorporation, tax licenses, IRS determination letters (unless mandated by state law), W9s, or certificates of registration.

    You must sign and agree to the Terms and Conditions after providing all of this information. By agreeing to the Terms and Conditions, you confirm that the data you supplied is accurate and that the state or US territory where you registered has approved the tax-exempt organization as legitimate. Within fifteen minutes of finishing the enrollment, your exemption ought to be in effect.

    Only the taxing authorities of some states and U.S. territories have the authority to provide exemptions. You will be required to upload your certificate for enrolment if you qualify for such an exemption. After reviewing your application and email, customer service will contact you within 24 hours to either confirm your enrollment or make a request for more details.

    To validate and enroll you in the program, the document must match the company name or address on the account.

    Documents uploaded must be signed, dated, and include an item description (if applicable). The following are some examples of appropriate descriptions: books, school supplies, cosmetics, personal care products, attire, accessories, and jewelry.

    Denial of the program will occur if the aforementioned things are not included.

    Buying products from Amazon and its partners

    We can only exempt you from those purchases if you decide to identify Amazon or any of its subsidiaries as the seller of record on the certificate. Your paperwork must be completed as mentioned above if you want to extend your exemption to Amazon.com Services Inc., its affiliates, and participating third-party sellers on the Amazon marketplace.

    Buying products from marketplace vendors

    Marketplace merchants are given the option to join ATEP, but they are not compelled to. Your exemption might not thus be applicable to sales made by non-participating merchants in states without Marketplace Facilitator Legislation.

    Limited Exemption

    Currently, our program does not offer partial enrollment exemptions. You must get in touch with us at tax-exempt@amazon.com if your organization is eligible for a partial exemption; we'll then credit your account.

    Every single time you place an eligible order, you must complete this.

    CHAPTER 4

    Tax Deduction Tips For Amazon FBA Business

    Collecting company records. reviewing balance sheets examining receipts collecting more data. Check out more receipts. Not only does getting ready for tax day seem arduous, it actually is. It seems sensible that small firms report investing almost 2.5 billion hours, or 1.25 million full-time jobs, in filing their taxes.
    There isn’t a magic formula for avoiding the effort (and hassles) involved in filing taxes for your small or medium-sized business, it’s true (SMB). These suggestions can help you prepare for Tax Day and maximize your available deductions, regardless of whether you work with a tax expert or do your own tax filing.
    Let’s learn about the most useful tips for Amazon FBA business tax deductions.
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    Most Useful Tax Deduction Tips

    • Observe these frequently misinterpreted business deductions
    When you run an SMB, it's easy—and understandable—for business and personal spending to mix. Here are three typical topics that could be confusing:

    • Travel: Your daily commute is a personal expense and not deductible. However, it is necessary to commute to and from work for off-site meetings. When it comes to trips, consider whether it is necessary for you to finish your work. If the answer is yes, it might also be a deductible expense.
    • Home office: If you use a certain area of your house only for work, you can deduct the costs associated with that space: Your mortgage interest, utilities, insurance, repairs, and depreciation are all tax deductible. But what if your family's recreation space also serves as your home office? The cost of a home office can only be written off if the area is used primarily and frequently for work-related activities.
    • Dining and entertainment: Building and keeping great client relationships involves having business lunches frequently. Not only are such lunches and dinners a great way to build relationships with your clients, but fifty percent of the expense of the meal can be written off. However, all meals for business picnics and events are entirely deductible. But what if you take a customer or a member of your staff to a baseball game? Despite being connected, entertainment costs are not deductible.
    Bonus point: Ordinary and reasonable business expenses are generally deductible. Keep the receipts for any purchases you're unsure if they qualify as company expenses and seek advice from a certified public accountant.

    • Select just one payment option for business transactions
    It can be difficult to keep track of every purchase, especially smaller ones. For all business expenses, you might choose to use a single payment method. For instance, you might obtain additional cards for your employees and use a small business credit card. All of your business purchases are documented in your monthly invoices for tax filing purposes.

    Bonus point: If you have a qualifying Prime membership, you may use the Amazon Business Prime American Express Card to earn points or select flexible payment terms like 5 percent Back or 90 Day Terms on purchases made in the United States at Amazon Business, AWS, Amazon.com, and Whole Foods Market. Earn 5% back on your first $120,000 in purchases each year, and 1% back after that.

    • Beware of small deductions because they pile up
    It can be difficult to know what is deductible from year to year because the tax legislation is always changing. While it's rare for the tax code to undergo significant changes, it's reasonable to believe that some purchases will continue to be deductable. However, it's possible to overlook new deductions, particularly for modest purchases, such as:

    • Petty cash: The costs are tax deductible, so the breakfast burritos you purchased with cash for a morning meeting are more than just a pleasant treat. Keep track of every monetary purchase your company makes.
    • Spending on document preparation: You can deduct the costs incurred if your company hired a professional to draught a business plan or complete a loan application. Did you print, collate, and bind them? These costs are also deductible.
    Bonus point: Consult the IRS's Publication 535, Business Expenses, for a comprehensive breakdown of deductions, or get in touch with a tax preparer.

    • Do not forget to pay your quarterly estimated taxes
    Businesses are obligated to pay the IRS on a quarterly basis if they anticipate owing more than $1,000 in taxes. Even sole proprietorships, the majority of small firms, fall inside that spectrum. Although making estimated tax payments can be difficult on your cash flow, it's crucial to make them on time. You'll avoid IRS penalties by doing this, such as getting assessed interest on your past taxes.

    If you're worried that your company won't have enough money saved up to make the quarterly projected payments, think about requesting a business line of credit to keep cash flowing.

    Bonus point: The IRS tax calendar is worth a look. Organize your complete fiscal year with this practical application, and create reminders for each tax payment.

    • Around tax season, think about making significant purchases on credit
    Because your company lacks the necessary funds, have you been postponing a major investment or the acquisition of expensive equipment? Making the transaction with exhausted payment terms is one strategy. In this manner, you can put off making a payment until after Tax Day and still write off the purchase on your taxes.

    Bonus point: The Amazon Business American Express Card offers Extended Payment Terms, which let you defer payments for longer periods of time without incurring interest. Terms apply.

    Planning ahead and using technologies that make it simple to keep track of every purchase will help you manage tax time so you can concentrate on what matters most to your business: your clients.

    CHAPTER 5

    Final Key Takeaways

    In this chapter, we will recall some of the important points associated with Amazon’s FBA business tax deductions.
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    Let’s Recall Some Important Points

    Like any other self-employed individual or business owner, sellers on Amazon.com and other platforms are actually eligible to deduct a wide range of costs, including rent for a home office, costs for education and training, and a host of other expenses.

    Before you get into paying or filing the sales tax for your Amazon FBA business, you will have to consider the major tax deductions mentioned above to get relief from tax liabilities.

    CHAPTER 6

    FAQs

    Do you still have queries related to Amazon FBA business tax deductions? This chapter is a must-read for you.
    Here are some of the most frequently asked questions that we have answered.
    Keep reading…
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    FAQs

    Are Amazon FBA costs deductible from taxes?

    The good news about Amazon fees is that you can write them off on your taxes. For more details, you can check out chapter 2 of this guide.

    Can Amazon refunds and returns be written off?

    Navigate to Income & Expenses and then go to the section where you enter your company's revenue and outgoing costs. Select "Rebates/refunds paid" after clicking Add income for this work. Report any revenue that customers have given back.

    Does Amazon automatically charge sellers' sales taxes?

    Yes, when a customer checks out on Amazon, they are all immediately charged sales tax. You don't need to do anything; Amazon's system takes care of everything and sends your customers an automated invoice that includes the sales tax. Recall that certain states additionally charge shipping taxes. a home office, costs for education and training, and a host of other expenses.

    Before you get into paying or filing the sales tax for your Amazon FBA business, you will have to consider the major tax deductions mentioned above to get relief from tax liabilities.

    Conclusion

    When attempting to lower your tax liability, it may be tempting to go beyond the letter of the law. But it’s wise to avoid becoming inventive when it comes to taxes. Pay attention to maintaining accurate records and allocating your budget to activities that will both lower your tax burden and expand your company.
    Finding a competent tax advisor like Free Cash Flow who is familiar with your Amazon business and who can give you guidance on anything that comes your way should be your first move if you need assistance.
    In addition to this, there are other tax deduction opportunities, and we can assist you to find every deduction you’re eligible to claim. Contact us for assistance.
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