What Tax Deductions Can Amazon FBA Sellers Claim?

In preparation for tax season as an Amazon FBA seller, it’s crucial to understand that, as a self-employed business owner, you are eligible for various tax deductions. Maintaining precise records and receipts for all business expenditures is essential, as these deductible expenses decrease your taxable income and, consequently, your overall tax liability. Please continue reading and contact an eCommerce Accountant at eBiz Accounting to ensure you don’t miss out on tax savings. 

What Counts as a Tax Deduction for Amazon FBA Sellers?

Running an Amazon FBA (Fulfillment by Amazon) business offers exciting opportunities, but it also entails intricate tax obligations. Whether you are a dedicated full-time seller or managing an e-commerce venture on the side, knowing which expenses qualify as legitimate tax deductions can lead to significant annual savings.

A tax deduction effectively lowers your taxable income, thereby decreasing your federal and state liabilities. For Amazon sellers, these deductions encompass the ordinary and necessary expenses associated with operating your business, covering a range of items from packaging materials to software subscriptions. Common tax deductions for Amazon FBA sellers include:

• Cost of Goods Sold (COGS): This reflects the costs that you incur to produce a product, including inventory purchases, manufacturing costs, freight and customs fees, as well as packaging and labeling costs. It should be noted that COGS can be tracked through Amazon’s monthly and annual inventory reports.
• Amazon Fees and Subscriptions: Amazon charges various fees to FBA sellers, all of which the IRS considers deductible as business expenses. This includes FBA storage and fulfillment fees, referral and closing fees, monthly subscription fees, and advertising and PPC campaign costs.
• Home Office: If you run your Amazon store from home, you may qualify for the home office deduction, even if you use Amazon’s warehouses. You can deduct a portion of your rent or mortgage, utilities, and internet based on the square footage of your home office space.
• Office Supplies and Equipment: Everyday essentials like computers, printers, notebooks, pens, and barcode scanners can be deducted for their full cost if these items are used exclusively for business.
• Shipping and Packaging Costs: Regardless of whether you handle shopping yourself or rely entirely on FBA, these costs are typically deductible. This includes postage and courier fees, shipping insurance, packing materials, and branded packaging or inserts.
• Returns and Refunds: The cost of processing returns, as well as the value of refunded items, may be written off.
• Travel Expenses: If you attend any trade show, supplier meetings, or Amazon conferences, you might be able to write off airfare, hotels, transportation, meals, and conference registration fees.
• Marketing and Advertising Expenses: Sponsored Amazon ads, social media and Google ads, graphic and logo creation, as well as website hosting, domain, and SEO services are all deductible items.

Many FBA sellers miss out on significant tax savings because they don’t diligently track their expenses throughout the year. Working with a CPA who specializes in e-commerce can help ensure that every applicable write-off is identified and utilized. At eBiz Accounting, we are prepared to make sure you claim every deduction you deserve while staying IRS-compliant. Connect with our firm today to schedule a consultation.