You’ve probably gone down the Google rabbit hole. Maybe even asked ChatGPT, “Do I need to pay Amazon taxes?” or “How does sales tax work if I sell in different states?” or “What’s a 1099-K and do I have to file it?”

And sure, those tools are helpful for quick answers. But let’s be honest: they don’t always give you the full picture. Not the kind you need when you’re staring at confusing tax forms, multiple state rules, and that fear that you might’ve missed something.

The point is you really need input from someone who deals with this stuff every day. Someone who’s spoken to hundreds of sellers like you, who’ve asked the same questions you’re asking now.

That’s why we made this guide.

We pulled in our tax experts, who sit with founders, sellers, and side-hustlers, and actually help them sort through it all. What made it in here is what they say works.

Just tried and tested tips, a few pain points you know too well, and actual steps to address them immediately 🙂

So, if taxes have been sitting on your mental to-do list for a while, start here. This one’s for you.

Understanding Amazon Taxes for Online Sellers in 2025

What “Amazon Taxes” Really Means: Sales Tax vs. Income Tax

You made your first $10K on Amazon. Now what?

Well, before you pop the champagne, let’s talk about something less exciting but super important: taxes.

“Amazon taxes” gets thrown around a lot, but here’s the thing, there’s no such thing as a single Amazon tax. It’s just a blanket term people use (usually in a panic) when they realize they have to deal with not one, but two types of taxes as a seller: sales tax and income tax.

Let’s clear it up real quick.

When you’re selling on Amazon, you’re basically running an e-commerce/online business. That means you’re responsible for:

• Sales tax, which is collected at the state level, and

• Income tax, which is collected at the federal level (and often at the state level too, depending on where you live and operate).

They’re totally different categories, each with its own rules, due dates, and consequences if ignored.

Sales Tax vs. Income Tax: Quick Comparison for Amazon Sellers

Feature	Sales Tax	Income Tax
1. Who collects it	State and local governments	IRS (federal) and possibly your state
2. Who pays it	The customer pays, but you collect it	You, based on your profit
3. Who’s responsible	You are responsible for collecting & filing	You are responsible for calculating & filing
4. When it’s due	Monthly, quarterly, or annually (varies by state)	Annually (April 15), or quarterly for estimated taxes
5. Common tools and platforms to manage�	Amazon (Marketplace Facilitator), doola	Your accountant, doola, IRS e-file

How Selling Through Amazon (FBA vs. FBM) Affects Tax Obligations

Before we dive into the tax details, let’s first get clear on what the difference is between FBA and FBM as it directly impacts your tax responsibilities.

• FBA (Fulfilled by Amazon):You ship your products to Amazon. They store it, pack it, ship it, and even handle customer complaints and returns. Basically, they’re your middleman (and warehouse + delivery team), and you just focus on getting stock to them.

• FBM (Fulfilled by Merchant): You list your products on Amazon, but everything else is on you. You store the product, pack it, ship it, and talk to the customer if something goes wrong. Amazon just gives you the platform to sell. That’s it.

So, how does this change your tax situation?

With FBA, Amazon might move and store your inventory in warehouses across different states. That means you could owe sales tax in all those states (even if you’ve never been there). Plus, FBA comes with a bunch of Amazon fees like storage, shipping, fulfillment, etc. Those are all deductible, but you need to track them.�

With FBM, your inventory usually stays in one place,  like your home, garage, or a single warehouse you manage. Since it’s not being stored across multiple states (like with FBA), you’re less likely to trigger sales tax obligations in multiple states.

In short, fewer storage locations = fewer tax headaches to deal with. And because Amazon isn’t involved in shipping or customer service, you’ll manage all that yourself. Amazon just gives you the platform, the rest is on you.

So, What Taxes Do You Actually Pay?

Here’s the simple breakdown for both models:

Does that make sense?

If you want to talk through your specific scenario, whether you’re using FBA, FBM, or a mix of both, go ahead and book a demo with our tax experts. We’ll help you get it sorted.

🔖 Related Read: Choosing the Right Business Type for Your Amazon Selling Venture

The 2025 Tax Landscape for Amazon Sellers: What’s New and What You Need to Know

E-commerce taxes don’t stay still. And if you’re an Amazon seller, the rules around what you report, where you owe tax, and how states track your sales have changed slightly.

From new IRS reporting thresholds to changes in state laws and tariff rules, 2025 is already shaping up to be a big year for tax compliance.

Let’s break down the biggest updates you should actually care about.

Lower 1099-K Thresholds: More Sellers Will Get Tax Forms

 If you sell on Amazon or any platform that processes payments for you, here’s what’s changing:

• In 2024, platforms had to send a 1099-K if your income was $5,000 or more.

• In 2025, that threshold drops to $2,500.

• And from 2026 onwards, it’ll be just $600.

So yes, even casual or part-time sellers will now get this form. If you’re receiving payments through Amazon (which you are), be prepared to track your earnings and expenses properly, because the IRS will now be watching earlier.

Economic Nexus Rules: Fewer Transactions, Same Tax Pressure

The concept of “nexus” (aka whether your business has enough presence in a state to owe sales tax there) isn’t new, but states are tweaking how they define it.

For example:

• New Jersey and Utah are exploring similar changes to simplify things for sellers.

What this means for you: While some states are dropping the transaction-count headache, your total revenue still matters.

And if you use FBA, remember? Amazon can store your inventory across multiple states, triggering nexus even if you’ve never personally sold anything there.

Import Tariffs Are Back: End of the ‘De Minimis’ Loophole

If you’re sourcing products from overseas, especially from China or Hong Kong, then this tax change is big.

The U.S. has closed the de minimis tax loophole for small shipments (under $800), which used to pass through customs without tariffs. Now, a 145% tariff applies to many small parcels.

So, if you’re an Amazon seller relying on international suppliers, your cost of goods just went up. You’ll need to rethink pricing, margins, or even explore new sourcing options.

 What Should You Do Now?

Here’s where doola steps in. Whether you’re FBA, FBM, or a hybrid Amazon seller, we’ll help you:

• Track income and expenses for proper 1099-K reporting

• Monitor nexus triggers in real time

• Set up clean, audit-proof bookkeeping

Book a demo session with our tax pros, and let’s make sure you don’t miss a single compliance detail this year.

Amazon Taxes for Online Sellers | The Role of Marketplace Facilitator Laws�

Marketplace Facilitator Laws are U.S. state-level tax laws that apply to large online platforms, not individual sellers, and require these platforms to collect and remit sales tax on behalf of third-party sellers using their websites.

Companies like Shopify, Amazon, Walmart, Etsy, and eBay are are considered marketplace facilitators because they:

• Process customer payments

• Handle checkout and order confirmation

• May even assist with shipping (especially true with Amazon FBA)

🔖 Related Read: How to Start Selling on Amazon US FBA From Anywhere in the World

How Amazon Handles Sales Tax Collection for Sellers

Here’s how Marketplace Facilitator Laws affect you, the seller:

✅ Amazon handles sales tax for you in most states:If you’re selling through Amazon, the platform automatically calculates, collects, and remits sales tax on your behalf in states with facilitator laws (which is nearly all 46 sales-tax states now). No extra work from you. It’s built into the order process.

✅ You may not need a sales tax permit in every state:Because Amazon is collecting the sales tax for you, many states no longer require you to register for a seller’s permit, unless:

• You sell on other platforms outside Amazon

• You hold inventory in that state (especially via FBA)

• Or the state still wants “zero-dollar” returns

✅ You’re still responsible for income tax:Marketplace facilitator laws cover sales tax, not income tax. You’re still expected to:

• Track your revenue and business expenses

• Report your income on your federal and (possibly) state return

• Pay estimated taxes if your earnings are high enough

Does Amazon Collect State Sales Tax?

Yes, in most U.S. states, Marketplace Facilitator laws are in effect, and since Amazon qualifies as one, it’s responsible for collecting and remitting sales tax based on the buyer’s location.� So, for the majority (or even all) of your orders, Amazon will automatically handle the sales tax and send it to the correct state tax authority.But that doesn’t mean you’re completely off the hook. As a seller, you’re still responsible for: Registering for a sales tax permit in any state where you have nexus (like if you store inventory via FBA). Filing reports in certain states that expect a breakdown of your total sales and revenue, even if Amazon is collecting the tax on your behalf.

State-by-State Variations in Marketplace Facilitator Laws

Let’s delve into the state-by-state variations in marketplace facilitator laws, focusing on key states like Colorado, New York, and Kansas.

📍 Colorado

Marketplace facilitators must collect and remit sales tax if they exceed $100,000 in gross sales in Colorado during the current or previous calendar year.

Colorado has a complex tax structure with state-administered and home-rule jurisdictions. Some local jurisdictions may require separate registrations and filings.

Sellers should be aware of the state’s destination-based sourcing rules, which can affect tax rates applied to sales.

📍 New York

Facilitators with over $500,000 in gross sales and more than 100 transactions in New York in the previous four quarters must collect and remit sales tax.

Even if the marketplace collects tax, sellers may still need to register for a Certificate of Authority if they have nexus in the state.

📍 Kansas

Kansas does not have a sales threshold; any marketplace facilitator making sales into Kansas must collect and remit sales tax.

Kansas is one of the few states without a de minimis threshold, meaning even minimal sales can trigger tax obligations.

Sellers should be cautious, as Kansas’s strict rules can lead to unexpected tax liabilities.

Here’s a table for you to see marketplace facilitator laws across a few important states:

State-by-State Marketplace Facilitator Laws (2025)

State	Sales Threshold (This is the total dollar amount of sales you make into that state that could trigger a tax obligation (a.k.a. “economic nexus”).	Transaction Threshold (This refers to the number of individual transactions (orders) you complete with customers in that state, regardless of dollar amount.)
Alabama	$250,000	None
Alaska	$100,000	None
Arizona	$100,000	None
Arkansas	$100,000	200
Connecticut	$100,000	200
Florida	$100,000	None

For more details, check here.

🧠 doola’s Quick Tip for the Do’ers

Even if Amazon (or another platform) is collecting the tax for you, you’re still responsible for knowing:

• Where your products are going

• If your total revenue or orders push you over a state’s threshold

• Whether the platform is remitting correctly

• And if you have to register or file a “zero” return in any states (yes, some ask for that)

Economic Nexus and Physical Nexus in 2025

In tax terms, think of nexus as your business leaving an economic footprint in a state.

If that footprint is big enough, through physical presence or substantial sales, the state expects you to collect and remit sales tax there. It’s basically the legal link between your business and the state’s tax system.

Now, states determine nexus in two main ways today: physical nexus and economic nexus.�

Physical Nexus (Traditional Physical Presence)

Physical nexus is the old-school standard for sales tax. It means your business has a tangible presence in the state.

If you have people or property in a state, you likely have a physical nexus there. No minimum threshold for physical nexus.

Key examples of physical nexus triggers:

• Office or Location: If your business is located in a state (e.g. your store or office is there), you automatically have nexus in that state. This is your home base and always counts.

• Employees or Reps: Having employees, contractors, or sales reps working in a state creates a nexus. Even temporary presence (like attending a trade show or a salesperson traveling in-state) can count in some cases.

• Inventory or Property: Storing inventory, products, or equipment in a state immediately creates a nexus. This is huge for Amazon sellers. If you use Amazon FBA and your products sit in an Amazon warehouse in a state, that’s your physical property in the state, and it establishes a nexus even if you have never set foot there.�

🧠 doola’s Quick Tip for the Do’ers

Make a list of states where you have any physical operations or inventory. These are your physical nexus states, you should be registered and collecting sales tax there already in most cases.

Economic Nexus (Sales Volume/Transaction Thresholds)

Economic nexus is the new standard (post-2018) that extends tax obligations to businesses without physical presence if they do enough business in a state.

This concept became law after the 2018 South Dakota v. Wayfair Supreme Court decision, which ruled that “conducting enough business” in a state (even with no physical presence) can obligate an out-of-state seller to collect sales tax.

How this economic nexus works: Each state sets a threshold for what counts as “enough business.” If you exceed that threshold, you establish a nexus in that state based on economic activity. Once you cross the threshold, you’re expected to register, collect, and remit sales tax for that state on future sales.

The two common yardsticks are:

• Annual sales revenue: If you sell over a certain dollar amount into the state in a year (for example, $100,000), you have nexus. This is by far the most common criteria.

• Number of transactions: In some states, making a certain number of separate sales (for example, 200 transactions) into the state can trigger nexus, even if the dollar total is lower. Each invoice/order counts as a transaction.�

Why this matters for Amazon FBA sellers: Amazon might move your inventory across multiple states without telling you in real time. That means you could have a physical nexus in 10+ states just by using FBA,  and each of those states could expect you to register, file, or at least be aware of their laws.

Do You Have Nexus in These States? Let’s Find Out

Now that we’ve covered the concepts, let’s turn this into an actionable quiz. Grab your sales data and let’s identify where you might have nexus.�

For each state, ask yourself the following:

💡Did I exceed the economic threshold?

Check your total sales and number of transactions for last year (and this year-to-date) against the threshold for that state.

For example, did you have more than $100,000 in sales or 200 sales transactions in the state? If yes, you have an economic nexus in that state. Mark that state as “Yes – Economic Nexus.”

💡 Do I have any physical presence there?

Think about inventory, offices, employees, or any business property in the state. For Amazon FBA sellers, look at where your products are warehoused.

For all sellers, consider where you operate or have staff. If yes, you have a physical nexus in that state (regardless of sales volume). Mark that state as “Yes – Physical Nexus.”

Now, review your answers: Any state with a “Yes” (either economic or physical) is a state where you likely have sales tax obligations.�

You should be registered (or plan to register) there and be collecting sales tax from customers in that state. Some states give you a short grace period after crossing the threshold, but in most cases, you’ll need to act by your next sale or filing period.

Need help mapping out where you have nexus and what to do next?�

Book a free call with doola’s sales tax experts and get clarity on where you owe what!

Income Tax Responsibilities for Amazon Sellers

Okay, now let’s shift gears from sales tax and talk about the thing that actually hits your bank account: income tax.

If you made money selling on Amazon, even as a side hustle, the IRS (and maybe your state) expects a piece of it.�

Here’s what that looks like in real terms:

Federal and State Income Tax Obligations

Let’s say you made $40,000 from Amazon sales last year. What does the IRS expect from you?

Short answer: They want to tax your profit,  not your total sales. So even if you’re dropshipping, flipping items, or selling private label products, what matters for taxes is what’s left after expenses.

Here’s how that breaks down:

📊 The Simple Income Tax Funnel

Gross Revenue:Total money you made from Amazon sales (example: $40,000)

Deductions: Business expenses like shipping, packaging, Amazon fees, ads, software, internet

Net Profit: The amount left after subtracting all business expenses (example: $24,000

Taxable Income:The net profit that gets reported on your tax return. This is what the IRS and (if applicable) your state use to calculate how much tax you owe. It’s the number that feeds into income tax and self-employment tax calculations.

Now, you’ll report this taxable income using:

• Schedule C (if you’re a sole proprietor or single-member LLC)

• Which flows into your Form 1040 (your main federal income tax return)

Please keep in mind: Even if you reinvest your profits into inventory, you’re still taxed on that profit. So track every business expense, it can lower your taxable income and save you real money.�

1099-K Updates and Thresholds in 2025

Got a 1099-K from Amazon in 2025? Here’s what it means.

Starting in 2025, Amazon must send you a Form 1099-K if you earned $2,500 or more in sales. (In 2026, this drops to just $600.) This form shows your total sales, not your profit. That’s where many sellers get confused.

What You Should Do: ✔️ Use the 1099-K to verify your sales total ✔️ Report net income (after expenses), not the full amount ✔️ Keep your own expense records. Amazon doesn’t track that for you

Self-Employment Tax and Quarterly Estimated Payments

​​As an Amazon seller operating as a sole proprietor or single-member LLC, you’re considered self-employed. This classification means you’re responsible for:

• Income Tax: Based on your net profit.

• Self-Employment Tax: Covers Social Security and Medicare taxes

🔍 Breakdown of Self-Employment Tax

Component�	Rate	Applies To
Social Security Tax	12.4%	First $176,100 of net earnings in 2025
Medicare Tax	2.9%	All net earnings (no income limit)
Total	15.3%	Combined rate for self-employment tax

Example: If your net earnings are $50,000:

• Multiply $50,000 by 92.35% = $46,175

• Then, $46,175 × 15.3% = $7,062 (self-employment tax owed)

Note: Only 92.35% of your net earnings are subject to self-employment tax, accounting for the employer-equivalent portion.

Filing Annual Income Tax Returns as an Amazon Seller As an Amazon seller, how you file your income taxes depends on your business structure. Most sellers either file using Schedule C along with their personal return or use Form 1120 if they’re structured as a partnership or corporation. Form 1040: This is the standard federal income tax return for individuals. It’s where you report your gross income (what you earned over the year), along with any deductions or credits to calculate how much you owe in taxes. Schedule C: Attached to your 1040, Schedule C shows your business income and expenses. It’s the go-to form for sole proprietors and single-member LLCs. Form 1065: If your Amazon business operates as a partnership, you’ll file with Form 1065. Each partner will also receive a Schedule K-2 or K-3 to report their share of the profits on their personal tax return. Form 1120 and 1120S: If your business is a C corporation (or an LLC filing as a C corp), you’ll use Form 1120. If it’s an S corporation, you’ll file with Form 1120S. In both cases, owners also receive a Schedule K-1 to report income on their personal return.

Quarterly Estimated Tax Payments

The IRS requires self-employed individuals to pay taxes as income is earned. If you expect to owe $1,000 or more in taxes for the year, you should make quarterly estimated tax payments.

2025 Tax Deadlines

💡 Tips to Stay Compliant: Use IRS Form 1040-ES: This form helps estimate your quarterly tax payments. Track All Income and Expenses: Maintain accurate records to determine your net earnings. Set Aside Funds Regularly: Consider setting aside a percentage of each sale to cover taxes. Avoid Penalties: Timely payments help you avoid underpayment penalties and interest charges. Seek Help: Consult with a tax professional for personalized guidance. Stay compliant with doola.

International Sellers on Amazon US: What You Need to Know

If you’re an international or non-resident Amazon seller, whether you’re based in India, Canada, the UK, or anywhere else, and you’re shipping goods to U.S. customers, there’s something you need to know:

🇺🇸 The U.S. government still expects you to pay taxes!

So, what kinds of taxes might you owe as a non-resident seller?

1. Federal Income Tax

You may owe income tax on profits earned from U.S. customers. The IRS doesn’t care where you live, if you’re making U.S.-sourced income, it’s taxable.

2. Withholding Tax

By default, the IRS requires 30% withholding on certain types of payments made to non-resident individuals or entities, unless reduced by a tax treaty. The U.S. has tax treaties with over 60 countries!

📉 U.S. Withholding Tax Rates for Non-Resident Sellers

Country�	Default rate	Treaty Rate (with W-8BEN/E)
Canada	30%	0%
India	30%	15%
United Kingdom	30%	0%
Australia	30%	5%
Singapore	30%	0%
UAE	30%	30% (No treaty)

Note: The treaty rates apply to specific types of income, such as royalties or business profits, and may vary based on the nature of the income and the provisions of the treaty. For a comprehensive understanding and to ensure compliance, it’s advisable to consult a tax professional.�

3. State Sales Tax

You might also owe state-level sales tax depending on:

• Where your inventory is stored (Amazon FBA = physical nexus)

• Where your customers live

• Whether your sales volume triggers economic nexus thresholds (e.g., $100,000 in a state)

What Documents & Registrations You Need to Stay Compliant

To properly handle these U.S. tax obligations, here’s what you’ll need, and why each one is important:

1. EIN (Employer Identification Number)

• What it is: A tax ID for your business, issued by the IRS

• Why you need it: Amazon requires it to verify your business; it’s also needed for IRS filings, bank account setup, and W-8BEN forms.

• How to get it: You can apply for an EIN online if you have an SSN, or through a Form SS-4 submission by fax/mail as a foreign entity. Or, let doola obtain it for you!

 2. W-8BEN or W-8BEN-E

• What it is: A form that tells Amazon (and the IRS) that you’re a non-U.S. seller and helps determine your withholding tax rate. W-8BEN is for individuals and W-8BEN-E is for foreign companies/entities.

• Why you need it: Without this form, Amazon will automatically withhold 30% of your payouts.

3. U.S. State Sales Tax Registration

• When it is required: You store goods in Amazon U.S. warehouses (FBA). Plus, you meet economic nexus thresholds (e.g., $100K+ or 200+ transactions in a specific state).

• Why it matters: States can impose penalties if you sell to their residents without collecting the right tax. Some states like California, Texas, and New York actively enforce this.�

doola Makes State Sales Tax Compliance Easy Whether you’re an international seller or based in the U.S., doola helps you: 🎯 Figure out where you’ve triggered nexus (physical or economic) 🎯 Register for sales tax in those states without any paperwork headaches 🎯 Stay compliant with the state’s reporting rules (some require monthly, quarterly, or even “zero returns”) 🎯 Avoid penalties and protect your Amazon account from tax-related issues Book a demo with our compliance team and get help registering for U.S. state sales tax.

Recordkeeping and Reporting Best Practices

Here are a few good recordkeeping and reporting best practices for Amazon sellers:

Keep Everything That Supports the Numbers on Your Financial Statements and Tax Returns.

Keeping thorough financial and tax records is not only good business practice, it’s a legal requirement for tax reporting.�

Many tax advisors recommend retaining records for up to 7 years (or longer for certain documents) to cover potential audit periods.

Below is a breakdown of essential documents Amazon sellers should maintain:

• Amazon Sales Reports & Summaries: Save monthly and annual sales reports from Amazon Seller Central. These detail your gross sales, refunds, and sometimes fees. Plus, they provide the evidence for revenue figures on your tax return and help reconcile with forms like the 1099-K.

• Form 1099-K (U.S. sellers): Amazon issues Form 1099-K annually if you meet the IRS threshold (currently > $20,000 in gross sales and >200 transactions in a calendar year). This form reports your total gross payments received via Amazon, including product charges, shipping fees, and sales tax collected.

• Expense Receipts and Invoices: Maintain receipts, invoices, or bills for every business expense. This includes supplier invoices for inventory purchases, shipping carrier bills, Amazon fees (which you can find in Amazon statements), software or advertising costs, packing supplies, etc. Each receipt or invoice should show the date, vendor, amount, and business purpose.�

• Bank Statements and Payment Records: Save bank statements for the account where Amazon disburses your funds, as well as credit card statements if you use a card for business purchases. These help verify that your recorded sales match deposits (minus Amazon fees) and that expenses were actually paid.

• Shipping and Fulfillment Records: Keep documentation of shipping fees and fulfillment costs.

✔️ For FBM (Fulfilled by Merchant) sellers, this includes the amounts customers paid for shipping (which Amazon may include in your gross sales) and the costs you paid to carriers.

✔️ For FBA sellers, retain Amazon’s FBA fee invoices and any shipping costs for sending inventory to Amazon warehouses.

• Tax Filings and Important Forms: Preserve copies of all tax returns filed (federal and state) and any key tax forms or correspondence.

✔️ For U.S. sellers, this could include your federal income tax return (Form 1040 + Schedule C or Form 1120/1065 for corporations/partnerships) as well as state income or sales tax filings.

✔️ For international sellers, keep copies of any IRS Form W-8BEN or W-8BEN-E you submitted to Amazon (which certifies foreign status for tax purposes), and any U.S. tax return filings like Form 1040-NR if you filed one. Also retain foreign tax returns that include your Amazon income.

Recommended Tool for Organized Recordkeeping doola is an integrated solution designed for entrepreneurs (including Amazon sellers) that handles bookkeeping, tax filings, and more. It can sync your transactions and help generate financial statements, while also providing a place to store documents and receipts. With doola, Amazon sellers can automatically track their sales, expenses, and even have professional bookkeeping assistance, which makes preparing reports or audit packages much easier.

Prepare for U.S. and International Audits

Even the most diligent sellers can be subject to an audit. The word “audit” might spark anxiety, but with preparation it doesn’t have to be frightening.

Remember: An audit is not an accusation of wrongdoing, but rather “an impartial review of your tax return to determine its accuracy.”

Here is a checklist of documents and information Amazon sellers like you should have readily available in case of an audit (U.S. or international):

• Amazon Sales Reports:Year-end and monthly sales summaries from Amazon, showing gross sales, returns, and taxes collected. Also, any channel reports from other platforms if you sell beyond Amazon. (These substantiate your revenue figures.)

• Tax Forms and Returns:Copies of filed tax returns for the year in question (federal, state, or foreign). Include the Form 1099-K from Amazon and any other tax forms (W-2s, 1099-NEC, etc.) that were part of your filing.

• Proof of Income Receipts:Bank statements or Amazon payout statements that tie your Amazon sales to actual deposits. If you have other payment processors or marketplaces, include those statements too.

• Expense Documentation:Receipts, invoices, and bills for all business expenses. This includes inventory purchase invoices, shipping fee receipts, software subscriptions, advertising invoices from Amazon or Facebook, etc.

• Financial Statements:If you use accounting software, have your Profit & Loss statement and balance sheet for the year available. The P&L is a concise summary of income and expenses that many auditors will ask for upfront.

• Sales Tax and VAT Records:If applicable, have records of any sales tax collected and remitted. For U.S. sellers, Amazon’s Marketplace Facilitator reports will show taxes they collected on your behalf; keep those.

• Business Entity Documents:In some audits (especially for international cases or state nexus issues), you might need to provide proof of your business structure. Keep handy your business registration documents (e.g., LLC or corporation formation certificate), your Employer Identification Number (EIN) issuance letter, and any relevant licenses. These establish who the taxpayer is.�

• Correspondence and Prior Audit History:If you’ve had any notices or letters from the IRS/state/CRA in the past about your Amazon business (e.g., a notice of underreported 1099-K income or a prior year audit results), keep those letters and your responses. They can sometimes clarify issues and ensure the auditor doesn’t double count a resolved matter.�

🔖 Related Read: A Comprehensive Guide to Amazon Accounting in 2025

Reconcile Amazon Reports With Tax Filings

A common challenge Amazon sellers face is making sure that the numbers in Amazon’s reports (and forms like the 1099-K) line up with what goes on their tax return or accounting books. It’s not unusual to see differences.�

For example, the gross sales on your Amazon 1099-K may not match the sales revenue figure in your profit and loss report. Don’t panic if you notice this. The key is understanding what causes these mismatches and how to reconcile them.

Let’s understand how to actually reconcile your Amazon reports with your accounting and tax figures.�

Step 1: Gather your reports:

Start with the essentials: your Amazon 1099-K (if you received one), year-end and monthly sales reports, payout summaries, and fee breakdowns. Pull up your Profit & Loss statement from your accounting tool (like doola). International sellers should also grab VAT or GST reports if applicable.

Step 2: Compare gross sales:

Check the total sales Amazon reports against what your books say. If Amazon’s 1099-K shows $120,000 and your P&L shows $108,000, pause!  The difference might be sales tax or shipping fees included by Amazon but excluded in your books. Subtract non-revenue items like tax collected and shipping charges to get your true sales figure. It often lines up once you adjust.

Step 3: Factor in refunds:

Amazon reports sales at the time of transaction, even if they’re refunded later. So if your books are net of refunds but Amazon’s gross includes them, add the refunds back temporarily to match totals. Use Amazon’s refund summary to get this figure and make the adjustment.

Step 4: Reconcile fees and expenses:

Amazon takes out a variety of fees; referral, fulfillment, ad spend, returns processing. These reduce your payout but should show up in your books as business expenses. If Amazon deducted $30,000 in fees and your books only reflect $28,000, look for missing charges. Tools like doola can help automate this, making reconciliation far less painful.

.Step 5: Tidy up any mismatches:

Still seeing a gap? It might be reimbursements from Amazon, sales from another marketplace, or a timing issue (like payouts crossing over into January). Document your final numbers in a simple table that shows the 1099-K gross, minus tax and fees, and matches your books. This will save you if the IRS ever asks questions.

Step 6: Loop in your accountant:

Don’t keep all this in your head! Share your reconciled figures with your accountant or bookkeeper. Explain adjustments like excluded sales tax or large returns, and make sure they’re recording Amazon fees properly. If you’re an international seller, tell them about any withholding taxes or tax treaty benefits you claimed with Amazon.�

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FAQs About Amazon Taxes for Online Sellers in 2025

Do I need to collect sales tax on every Amazon order?

No. In most states, Amazon collects and remits sales tax for you as a marketplace facilitator.

Which states require me to file a sales tax return even if Amazon collects the tax?

Some states like Colorado, Connecticut, and Pennsylvania may still require you to file a return, even if Amazon handles collection.

How does using Amazon FBA affect my tax situation?

FBA can create a tax nexus in multiple states where Amazon stores your inventory, which may trigger sales tax or income tax obligations in those states.

What if I sell on Amazon and other platforms? Do I need to register in more states?

Yes, if other platforms don’t collect tax for you or you meet economic nexus thresholds in more states, you may need to register and file in those additional states.