Amazon Seller Accounting: The Complete Guide for 2026

Most Amazon sellers have no idea if they’re actually profitable.

They see deposits hit their bank account every two weeks. They assume things are going well. But those deposits hide dozens of fee types, timing gaps, and accounting headaches. Amazon is one of the hardest platforms to track right.

Here’s the truth: that $10,000 deposit isn’t $10,000 in revenue. It’s revenue minus referral fees, FBA fees, storage fees, and refunds. There are a dozen other deductions too. Record deposits as sales and you’re understating revenue. You’re missing expense deductions. You’re flying blind on profit.

This guide covers everything you need to know about Amazon seller accounting. We’ll go from basic bookkeeping to advanced tax strategies. New seller figuring out QuickBooks? You’ll find help here. Seven-figure operation looking to optimize? We’ve got you covered.

We’ll cover:

• The fundamentals of Amazon accounting (cash vs accrual, chart of accounts)
• Why Amazon accounting is uniquely complex (and how to handle each challenge)
• What accounting looks like at each business stage ($0 to $1M+)
• How to set up your accounting system properly
• Settlement reports, fees, inventory, and sales tax
• Tax deductions most Amazon sellers miss
• When to hire professional help
• How to automate and save hours every month

Let’s get your books in order.

Table of Contents

1. Amazon Accounting Fundamentals
2. Why Amazon Accounting is Uniquely Challenging
3. Amazon Accounting by Business Stage
4. Setting Up Your Amazon Accounting System
5. Understanding Amazon Settlement Reports
6. Tracking Amazon Fees in Your Books
7. Inventory and COGS Accounting
8. Sales Tax Accounting
9. Tax Deductions for Amazon Sellers
10. Choosing the Right Business Entity
11. International Amazon Accounting
12. Financial Reports Every Amazon Seller Needs
13. Common Amazon Accounting Mistakes
14. When to Hire Professional Help
15. Automating Your Amazon Accounting
16. FAQ

Amazon Accounting Fundamentals

Let’s start with the basics. Get these right and the rest gets easier.

Bookkeeping vs Accounting: What’s the Difference?

People use these terms interchangeably. They’re actually different:

Bookkeeping is data entry. You record every sale, fee, expense, and payment in the right category. It’s the foundation.

Accounting is analysis. You turn that data into financial statements, tax returns, and business insights.

Most Amazon sellers need to nail bookkeeping first. Get the data entry right before worrying about analysis. A fancy accountant can’t help if your records are a mess.

Cash vs Accrual Accounting

This choice affects when you record revenue and expenses. It matters more than most sellers think.

Cash basis records transactions when money moves:

• Revenue when you get paid
• Expenses when you pay them

Accrual basis records transactions when they happen:

• Revenue when you make the sale (even if payment comes later)
• Expenses when you receive goods or services (even if you pay later)

When to use cash basis:

• Revenue under $1 million (gross receipts test)
• You want simplicity
• You’re a sole proprietor or small LLC
• You want to see actual cash flow

When to use accrual basis:

• Revenue over $1 million (IRS requires it)
• Inventory-based business over $26 million (required)
• You want accurate profitability by period
• You’re planning to sell the business
• You want GAAP-compliant financials

The Amazon timing problem:

Amazon pays you about two weeks after sales happen. This creates a mismatch at month and year end.

Example: You sell $10,000 in products from December 15-31. Amazon pays you January 14.

• Cash basis: $0 December revenue, $10,000 January revenue
• Accrual basis: $10,000 December revenue, $0 January revenue

Trying to understand December profits? Managing year-end taxes? This difference matters.

Our take: Start with cash basis. It’s simpler. Switch to accrual when you hit $250K in revenue or need better period comparisons.

Setting Up Your Chart of Accounts

Your chart of accounts is how you sort every transaction. Set it up right and bookkeeping gets way easier.

Here’s what works for Amazon sellers:

Income Accounts:

• Product Sales - Amazon US
• Product Sales - Amazon CA
• Product Sales - Amazon UK/EU
• Shipping Income
• Gift Wrap Income
• Reimbursements - Amazon
• Other Income

Cost of Goods Sold:

• Product Costs
• Inbound Shipping to FBA
• Prep and Packaging Supplies
• Inventory Adjustments (shrinkage, damage)

Expenses - Amazon Fees:

• Referral Fees
• FBA Fulfillment Fees
• FBA Storage Fees
• FBA Long-term Storage Fees
• Subscription Fees
• Advertising Fees (PPC)
• Other Amazon Fees

Expenses - Operating:

• Software and Subscriptions
• Professional Services (accounting, legal)
• Office Supplies
• Shipping Supplies
• Travel and Mileage
• Home Office
• Bank and Payment Processing Fees
• Insurance
• Education and Training

Why this matters:

Break out fees by type. You’ll see exactly where money goes. Storage fees eating your margin? You’ll spot it. Referral fees spike in a category? You’ll catch it.

Lump everything into “Amazon Fees” and you learn nothing useful.

Why Amazon Accounting is Uniquely Challenging

Amazon isn’t like Shopify or your own website. The platform handles payments. It charges dozens of fee types. It collects taxes for you. It pays you in lump sums. Each piece adds complexity.

Challenge #1: Lump Sum Settlements

Amazon doesn’t pay you per order. Every two weeks, they batch everything together:

• Gross sales from dozens or hundreds of orders
• Multiple fee types deducted
• Refunds processed
• Reimbursements added
• Previous balance adjustments

Your bank deposit is the net result of all this activity.

Why it matters: Record just the deposit and you lose the details. You won’t know your real revenue, fees, or refunds. You’ll miss tax deductions. Your profit numbers will be wrong.

The fix: Break down every settlement. Record gross revenue. Then record each fee type and adjustment. This is tedious by hand. Automation tools save hours here.

Challenge #2: Dozens of Fee Types

Amazon charges fees for everything. Here’s what you might see:

1. Referral fees - 8-45% depending on category
2. FBA fulfillment fees - Pick, pack, and ship per unit
3. Monthly storage fees - Per cubic foot
4. Long-term storage fees - Items stored 271-365+ days
5. Aged inventory surcharge - Additional long-term penalty
6. Removal fees - Getting inventory back
7. Disposal fees - Having Amazon destroy inventory
8. FBA inbound placement fees - Shipping to multiple warehouses
9. Labeling fees - If Amazon labels for you
10. Prep service fees - Poly bagging, bubble wrap, etc.
11. Unplanned service fees - Fixing your prep mistakes
12. Professional subscription fee - $39.99/month
13. Refund administration fees - When customers return items
14. High-volume listing fees - Over 100,000 active SKUs
15. Advertising fees - Sponsored Products, Brands, Display

Track each of these separately. You need them for expense reports and tax deductions. Want more detail? See our complete guide to Amazon seller fees.

Challenge #3: Multi-Marketplace Selling

Selling on Amazon US, Canada, UK, and EU means:

• Multiple currencies
• Multiple tax jurisdictions
• Multiple settlement reports
• Currency conversion timing differences

Example: You sell £100 on Amazon UK. When do you record it in USD? At the sale date rate? Or the settlement date rate? Either works. But pick one and stick with it. The difference adds up when rates move.

Challenge #4: Inventory and COGS Tracking

Your inventory sits in Amazon’s warehouses. Not yours. This creates tracking problems:

• Amazon loses and damages inventory (they sometimes reimburse you)
• Multi-channel fulfillment messes up unit counts
• Returns come back sellable or unsellable
• COGS timing depends on your accounting method

What you need to track:

• Units sent to FBA
• Units sold
• Units returned (and condition)
• Units lost or damaged
• Units removed or disposed
• Current inventory count
• Landed cost per unit

Skip this and your cost of goods sold is a guess. Your profit margins are fiction. Learn more in our Amazon COGS guide.

Challenge #5: Sales Tax Complexity

Amazon collects and remits sales tax in all 45 states that have it (plus DC and Puerto Rico).

But you still need to:

• Know where you have sales tax nexus
• File returns in nexus states (even if $0 due)
• Handle exempt sales right
• Manage non-Amazon channels where you collect yourself

Amazon handles collection. That doesn’t mean you can ignore sales tax. See our Amazon FBA sales tax guide for details.

Challenge #6: Timing Differences

If you use accrual accounting, timing gets complicated:

1. Customer places order (Day 1)
2. Amazon ships product (Day 3)
3. Customer receives it (Day 5)
4. Return window opens
5. Amazon pays you (Day 14)
6. Customer returns item (Day 25)
7. Amazon processes refund (Day 26)

When do you recognize revenue? When do you recognize the return? For monthly financial statements, these timing questions matter.

Challenge #7: Commingled Data

Amazon mixes transaction types across reports:

• Sales and refunds in the same report
• Fees deducted from gross amounts
• Reimbursements mixed with revenue
• Different reports for different data

To get the complete picture, you need to pull and reconcile:

• Settlement reports
• Transaction reports
• Fee detail reports
• Inventory reports
• Return reports
• Reimbursement reports

No single report tells the whole story.

Amazon Accounting by Business Stage

Your accounting needs change as you grow. A $20K side hustle doesn’t need the same systems as a $2M operation. Here’s what to focus on at each stage.

Stage 1: Getting Started ($0-50K Annual Revenue)

Your situation:

• Probably a side hustle
• Limited SKUs (under 50)
• Single marketplace (US only)
• Sole proprietorship or single-member LLC

Accounting priorities:

1. Track every expense - Keep receipts, log purchases
2. Separate business and personal - Different bank accounts and credit cards
3. Understand product-level profit - Know your margins
4. Basic bookkeeping - Can be spreadsheet or simple software

Recommended setup:

• Accounting software: Wave (free) or QuickBooks Simple Start ($30/month)
• Automation: Optional at this stage, but saves time
• Professional help: DIY with TurboTax or similar at tax time

Time investment: 2-4 hours per month

Key metrics to track:

• Total revenue
• Total Amazon fees
• Cost of goods sold
• Net profit
• Profit margin by product

Common mistakes at this stage:

• Not tracking expenses (missing tax deductions)
• Mixing personal and business spending
• Thinking the Amazon deposit equals your profit

At this stage, simplicity wins. Don’t overcomplicate. But don’t skip the basics. Especially separating business and personal finances.

Example P&L for a $40K/year seller:

At this stage, knowing these numbers matters more than sophisticated analysis.

Stage 2: Growth Mode ($50K-250K Annual Revenue)

Your situation:

• This is becoming a real business
• More SKUs, possibly multiple categories
• Maybe exploring Canada or other marketplaces
• Should consider LLC or S-Corp

Accounting priorities:

1. Real accounting software - Spreadsheets won’t cut it anymore
2. Automated settlement reconciliation - Manual takes too long
3. Monthly financial review - Look at your numbers every month
4. Quarterly estimated taxes - You’ll owe them
5. Inventory tracking system - Know what you have and what it cost

Recommended setup:

• Accounting software: QuickBooks Online or Xero
• Automation: Taxomate or similar (essential at this stage)
• Professional help: Virtual bookkeeper (5-10 hours/month) + CPA for taxes

Time investment: 4-8 hours per month with automation, or outsource

Key metrics to track: Everything from Stage 1, plus:

• Profit margin by product and category
• Amazon fees as percentage of revenue
• Inventory turnover rate
• Advertising cost of sale (ACoS)
• Return rate by product

Business entity consideration:

At $50K or more in profit, S-Corp election often saves money on self-employment tax. The math gets favorable quickly. Talk to a CPA before your next tax year. For more on this decision, see choosing the right legal entity.

Example monthly workflow for a $150K/year seller:

Stage 3: Scaling Up ($250K-1M Annual Revenue)

Your situation:

• Full-time business or close to it
• Significant inventory investment
• Multiple marketplaces likely
• Employees or contractors
• Should be S-Corp or multi-member LLC

Accounting priorities:

1. Accrual accounting - More accurate picture of performance
2. Robust inventory management - Integrated software, not spreadsheets
3. Cash flow forecasting - Growth eats cash
4. Monthly P&L review - With actual insights, not just numbers
5. Quarterly business review - With your accountant

Recommended setup:

• Accounting software: QuickBooks Online Plus/Advanced or Xero
• Inventory: Integrated system (SkuVault, Sellbrite, or similar)
• Automation: Taxomate (essential)
• Professional help: Bookkeeper (10-20 hours/month) + ecommerce-specialized CPA

Time investment: Monthly review meetings, but day-to-day is outsourced

Key metrics to track: Everything from Stage 2, plus:

• Gross margin by channel
• Contribution margin by product
• Working capital and cash conversion cycle
• Debt service coverage (if you have loans)
• Year-over-year growth rates

Cash flow warning:

Growth eats cash. A $500K business buying inventory for a $1M year needs substantial working capital. You can be profitable on paper and still run out of money. Track cash obsessively. Read more in our cash flow management guide.

Stage 4: Enterprise ($1M+ Annual Revenue)

Your situation:

• Serious company
• Possibly seeking investment or planning an exit
• Multiple sales channels beyond Amazon
• Team of employees
• Complex inventory and supply chain

Accounting priorities:

1. Accrual accounting - Required over $1M anyway
2. GAAP-compliant statements - If seeking investment
3. Sophisticated cash flow management - Forecasting is critical
4. Tax planning - Not just compliance, but strategy
5. Audit-ready books - Clean enough for due diligence

Recommended setup:

• Accounting software: QuickBooks Online Advanced, Xero, or NetSuite
• Professional help: Full-service ecommerce accounting firm + tax strategist
• Automation: Taxomate plus additional integrations

Key metrics to track: Everything from Stage 3, plus:

• EBITDA
• Customer acquisition cost
• Inventory aging analysis
• Working capital ratio

Exit planning note:

If you want to sell your business eventually, clean books add real value. We’re talking 0.5x to 1x on your multiple. Start preparing your financials 2-3 years before a potential sale. Not 2-3 months.

What buyers look for:

• GAAP-compliant accrual financials
• Clear revenue by channel and marketplace
• Documented COGS methodology
• Three years of clean P&L statements
• No personal expenses mixed in
• Reconciled accounts with supporting documentation

Summary: Accounting by Stage

Don’t over-invest early or under-invest late. Match your systems to your stage.

Setting Up Your Amazon Accounting System

With the fundamentals covered, let’s get practical. Here’s how to set up a system that works.

Choosing Accounting Software

The right software depends on your stage and needs:

Our recommendation by stage:

• Stage 1 ($0-50K): Wave or QuickBooks Simple Start
• Stage 2 ($50K-250K): QuickBooks Online Plus or Xero
• Stage 3 ($250K-1M): QuickBooks Online Plus/Advanced or Xero
• Stage 4 ($1M+): QuickBooks Advanced, Xero, or NetSuite

The key factor: make sure whatever you choose integrates with Amazon via Taxomate or similar automation. Manual data entry at scale is unsustainable.

Related: Amazon QuickBooks integration | Amazon Xero integration | Amazon Wave integration

Connecting Amazon to Your Accounting Software

You have two paths: manual or automated.

The manual approach:

1. Download settlement report from Seller Central
2. Open in Excel, format the data
3. Categorize each line item (sales, fees, refunds, etc.)
4. Create journal entries in accounting software
5. Enter each entry manually
6. Reconcile with bank deposit
7. Repeat every two weeks

Time required: 2-4 hours per settlement, or 4-8 hours per month.

The automated approach:

1. Connect Taxomate to Amazon Seller Central (one-time setup)
2. Connect Taxomate to your accounting software (one-time setup)
3. Taxomate automatically imports and categorizes each settlement
4. Review the imported transactions
5. Approve and post
6. Reconcile with bank deposit

Time required: 15-30 minutes per settlement, or about 1 hour per month.

The math is simple: automation saves 3-5 hours monthly. If your time is worth $50/hour, that’s $1,800-3,000 per year. More than the cost of the tool.

Beyond time savings, automation eliminates data entry errors, ensures consistent categorization, and gives you properly broken-out fees for tax deductions.

Initial Setup Checklist

Before connecting anything, make sure these pieces are in place:

Prerequisites:

• Business bank account (separate from personal)
• Accounting method decided (cash or accrual)
• Chart of accounts configured
• Historical data plan (how far back will you import?)

System setup:

• Create accounting software account
• Configure chart of accounts (use our Amazon seller template)
• Connect business bank account for reconciliation
• Sign up for Taxomate
• Authorize Amazon Seller Central connection
• Connect Taxomate to accounting software
• Map Amazon data to your chart of accounts
• Run test import with one settlement
• Verify categorization is correct
• Import historical data if needed

Ongoing process:

• Review and approve imports weekly or bi-weekly
• Reconcile bank account monthly
• Review P&L monthly
• Quarterly review with accountant (if applicable)

Understanding Amazon Settlement Reports

Your settlement report is the source of truth for what Amazon paid you and why. Understanding it is essential for accurate books.

How Amazon Settlements Work

The basic cycle:

1. Customer places an order
2. Amazon collects payment from customer
3. Amazon deducts their fees
4. Every 14 days, Amazon calculates your balance
5. If positive, Amazon transfers funds to your bank (takes 3-5 days)
6. If negative, the balance carries forward to next period

Critical point: The deposit you receive is NOT your revenue. It’s:

If you record only the deposit, you’re missing most of the picture.

Anatomy of a Settlement Report

Amazon settlement reports contain several sections:

Order Revenue:

• Product sales
• Product sales tax (collected by Amazon, passes through)
• Shipping credits
• Gift wrap credits
• Promotional rebates

Refunds:

• Refunded sales amounts
• Refunded shipping
• Refunded gift wrap
• Fees returned to you (from the original order)

Fees:

• Referral fees
• FBA fulfillment fees
• FBA storage fees
• Subscription fees
• All other fees

Other:

• Reimbursements (lost inventory, customer damage, etc.)
• Balance adjustments
• Transfers

Example settlement breakdown:

The accounting entries (simplified):

When the settlement processes:

• Debit: Cash (Bank Account) — $10,475
• Debit: Amazon Fees Expense — $4,300
• Debit: Sales Returns — $800
• Credit: Sales Revenue — $15,500
• Credit: Other Income (Reimbursements) — $75

This properly records your full revenue of $15,500, your expenses of $4,300, and your returns of $800. All of which matter for taxes and analysis.

Common Settlement Issues

Negative balance: Happens when fees plus refunds exceed sales. Common during slow periods or after major returns. Amazon carries the balance forward; you don’t receive a deposit. No action needed, but track it.

Reserve balance: Amazon holds back funds for new sellers or those with performance issues. The reserve shows in your settlement but isn’t deposited. It releases over time as Amazon builds trust.

Missing transactions: Sometimes transactions fall between settlement periods. Always reconcile to your actual bank deposit, not the expected amount from reports.

Currency conversion: International settlement deposits are converted to your currency. The rate Amazon uses may differ slightly from the rate in your report. Small differences are normal.

Step-by-Step Settlement Reconciliation

Here’s exactly how to reconcile a settlement:

1. Download your settlement report

In Seller Central: Reports → Payments → Date Range Reports → Settlement

2. Identify the key totals

From the settlement, note:

• Total product sales
• Total product sales tax (passes through, not your income)
• Total Amazon fees
• Total refunds
• Total other (reimbursements, adjustments)
• Net proceeds (what hits your bank)

3. Match to your bank deposit

The net proceeds should match your bank deposit within a few cents (rounding). If there’s a significant difference, investigate.

4. Create your journal entry

If doing manually (example for $10,475 settlement above):

Debit: Checking Account           $10,475.00
Debit: Amazon Referral Fees       $2,250.00
Debit: Amazon FBA Fees            $1,800.00
Debit: Amazon Storage Fees        $150.00
Debit: Amazon Other Fees          $100.00
Debit: Sales Returns              $800.00
Credit: Sales Revenue             $15,500.00
Credit: Other Income - Reimb.     $75.00

5. Reconcile your bank account

At month end, verify every deposit and withdrawal matches your accounting records.

This process takes 2-3 hours manually per settlement. Taxomate automates steps 1-4 automatically.

Tracking Amazon Fees in Your Books

Amazon fees are your second-largest expense after cost of goods (usually 25-35% of revenue). Track them properly.

Fee Categories and How to Record Them

Referral Fees

• What: Percentage of sale price, varies by category (8-45%)
• Account: Expense — Amazon Referral Fees
• Note: Typically your largest Amazon fee

FBA Fulfillment Fees

• What: Per-unit fees for picking, packing, and shipping
• Account: Expense — FBA Fulfillment Fees
• Note: Varies by size tier and weight

Storage Fees

• What: Monthly fee based on cubic feet of inventory
• Account: Expense — FBA Storage Fees
• Note: Higher rates October-December and for aged inventory

Long-term Storage Fees

• What: Additional charges for items stored over 271 days
• Account: Expense — FBA Long-term Storage Fees
• Note: Can be substantial; signals slow-moving inventory

Advertising Fees

• What: Sponsored Products, Brands, Display ad spend
• Account: Expense — Advertising (keep separate from other Amazon fees)
• Note: Track separately to measure advertising ROI

Subscription Fees

• What: $39.99/month Professional seller account
• Account: Expense — Amazon Subscription Fees
• Note: Charged regardless of sales volume

Other Fees

• What: Labeling, prep, removal, disposal, unplanned services
• Account: Expense — Other Amazon Fees
• Note: Break out individually if any category is significant

Why Proper Fee Categorization Matters

Tax deductions: All Amazon fees are deductible business expenses. Missing them means overpaying taxes. For a seller with $200K revenue and 30% in fees, that’s $60K in deductions.

Profitability analysis: Lumping all fees together hides useful information. You can’t see:

• Which products have high fulfillment costs
• Whether storage fees are killing certain SKUs
• If advertising is actually generating profitable sales

Benchmarking: Industry benchmarks exist. If your referral fees are 25% of revenue but the average for your category is 15%, something’s wrong.

Typical fee percentages for a healthy Amazon business:

• Referral fees: 12-18% of revenue
• FBA fulfillment fees: 10-15% of revenue
• Storage fees: 1-3% of revenue
• Total Amazon fees: 25-35% of revenue

If your total is above 35%, dig into why. If it’s below 25%, you’re doing well on fee efficiency. For strategies to reduce fees, see how to lower your Amazon seller fees.

Inventory and COGS Accounting for Amazon Sellers

Cost of goods sold determines your gross margin. Get it wrong and your profitability numbers are meaningless.

What COGS Includes

Include in COGS:

• Product purchase cost
• Inbound shipping to Amazon
• Customs duties and import fees (if applicable)
• Prep and packaging materials
• Inspection costs

Do NOT include in COGS:

• Amazon fees (those are operating expenses)
• Advertising spend
• Software subscriptions
• Your time
• Storage fees (operating expense, not product cost)

Why COGS Matters

Your gross margin formula:

Calculate your gross margin:

If your gross margin is too low, you can’t be profitable. Amazon fees take 25-35%, you have other operating expenses, and you need actual profit left over.

Rule of thumb: Aim for 40%+ gross margin on Amazon. Below that, you’re working with thin margins that leave little room for error.

COGS Calculation Methods

FIFO (First In, First Out)

• Oldest inventory cost is expensed first
• Most common method for Amazon sellers
• Required in some situations

Average Cost

• Average purchase price across all inventory
• Simpler to calculate
• Works well when costs are stable

LIFO (Last In, First Out)

• Newest costs expensed first
• Rarely used for Amazon sellers
• Not allowed under international accounting standards

Example: FIFO vs Average Cost

You purchased:

• January: 100 units @ $8 each
• March: 100 units @ $10 each

You sold 150 units in April.

FIFO COGS: (100 × $8) + (50 × $10) = $1,300 Average Cost COGS: 150 × $9 = $1,350

Different methods, different profit numbers. Pick one and stay consistent. FIFO is our default recommendation unless your accountant advises otherwise.

Handling Inventory Adjustments

Lost inventory:

Amazon loses inventory. It happens. When they reimburse you:

• Debit: Cash or Accounts Receivable
• Credit: Inventory
• Net effect: Inventory converts to cash at (hopefully) your cost or above

Track reimbursements carefully. Amazon doesn’t always pay automatically; you may need to file claims.

Damaged inventory (unsellable returns):

Some returns come back damaged and can’t be resold:

• Debit: Inventory Loss (expense)
• Credit: Inventory
• Net effect: Write off the cost of damaged goods

Disposed inventory:

When you have Amazon destroy slow-moving inventory:

• Debit: Inventory Loss (expense)
• Credit: Inventory
• Net effect: Write off plus disposal fee expense

Returned inventory (sellable):

If returned items go back into sellable inventory, no COGS adjustment needed. The units are back; reverse the original COGS entry if you’ve already recorded it.

Sales Tax Accounting for Amazon Sellers

Sales tax used to be a major headache for Amazon sellers. Marketplace facilitator laws simplified collection, but you still have responsibilities.

What Marketplace Facilitator Means

Amazon collects and remits sales tax on your behalf in all 45 states with sales tax, plus DC and Puerto Rico.

What this means for your accounting:

• Sales tax collected by Amazon is NOT your revenue
• It passes through Amazon directly to tax authorities
• You don’t record it as income or expense
• It shows in settlement reports but doesn’t hit your books

What You Still Need to Do

Marketplace facilitator laws didn’t eliminate all obligations:

1. Know your nexus states

You have nexus (tax obligation) where you have:

• Physical presence (your home state, employees, inventory)
• Economic nexus (typically $100K+ in sales or 200+ transactions)

FBA inventory creates physical nexus in every state where Amazon stores your products. You likely have nexus in 20+ states.

2. File returns (even if $0)

Many states require returns even when Amazon remitted everything. Zero-dollar returns are still required. Penalties for not filing can be significant.

3. Handle exempt sales

If you sell to wholesale customers with resale certificates or tax-exempt organizations, you need to manage those exemptions.

4. Manage non-Amazon channels

Selling on your own website or other marketplaces? You may need to collect and remit sales tax yourself.

Sales Tax in Your Books

For marketplace facilitator sales (most Amazon orders):

Record gross sale amount as revenue. Amazon’s settlement already excludes the tax. It passed straight through. No sales tax liability hits your books.

For sales where you collect (your website, etc.):

When you make the sale:

• Debit: Cash/Accounts Receivable (full amount including tax)
• Credit: Revenue (sale amount only)
• Credit: Sales Tax Payable (tax amount)

When you remit to the state:

• Debit: Sales Tax Payable
• Credit: Cash

Tax Deductions for Amazon Sellers

Every legitimate deduction you miss is money given to the IRS. Here’s the complete list of deductions Amazon sellers commonly overlook.

Why this matters: A typical Amazon seller with $200K revenue might have $50-70K in deductible expenses beyond COGS. At a 25% tax rate, missing $10K in deductions costs you $2,500 in unnecessary taxes. This section alone could save you thousands.

Product-Related Deductions

• Cost of goods sold: Everything that goes into your product’s landed cost. Purchase price, freight, customs, inspection fees.
• Product samples: Items bought for research, testing, quality checks, or photography. Keep receipts and document the business purpose.
• Product photography: Professional photo services, camera equipment, lighting, backdrops, props, editing software.
• Packaging materials: Poly bags, boxes, bubble wrap, packing tape, shipping labels, custom inserts, thank-you cards.
• Prep supplies: FBA labels, suffocation warning stickers, removal labels, shrink wrap, prep service fees.

Example: You spend $500 on product samples to evaluate before placing a $5,000 order. That $500 is deductible even if you decide not to order the product.

Amazon-Specific Deductions

• All Amazon fees: Referral, FBA fulfillment, storage, subscription, advertising, removal, disposal. Every fee is deductible.
• Integration software: Taxomate, A2X, Link My Books, inventory management tools, repricing software.
• Research tools: Jungle Scout, Helium 10, Keepa, AMZScout, SellerAmp, other product research and analytics.
• Training: Amazon seller courses, coaching programs, FBA conferences, webinar subscriptions.

Example: You pay $39.99/month for Professional Seller, $500/month in PPC advertising, $100/month for repricing software, and $50/month for Taxomate. That’s $8,400/year in deductible software and fees beyond the standard Amazon fees in your settlements.

Home Office Deduction

If you work from home, you can deduct a portion of home expenses. Two methods:

Simplified method:

• $5 per square foot of dedicated office space
• Maximum 300 square feet ($1,500 max deduction)
• Easy to calculate, no detailed records needed

Actual expense method:

• Calculate percentage of home used for business (square footage)
• Deduct that percentage of: rent or mortgage interest, utilities, insurance, repairs, property taxes
• Requires more record-keeping but often yields larger deduction

Requirements:

• Dedicated space used exclusively for business
• Regular use (not occasional)
• Principal place of business

Example:

• 150 sq ft dedicated office in 1,500 sq ft home = 10%
• Annual home expenses: $24,000
• Actual method deduction: $2,400
• Simplified method: $750

The actual method often wins for Amazon sellers with significant home expenses.

Vehicle and Mileage Deductions

If you drive for business purposes, track those miles.

Standard mileage rate for 2025: 67 cents per mile (check IRS for current year)

Deductible trips:

• Sourcing products (retail arbitrage, wholesale visits, trade shows)
• Post office, shipping supply stores
• Bank, accountant, lawyer meetings
• Business conferences and events

Keep a mileage log with:

• Date
• Destination
• Business purpose
• Miles driven

Apps like MileIQ automate this tracking.

Professional Services

• Accountant/CPA fees: Tax prep, bookkeeping, consulting.
• Legal fees: Entity formation, contracts, trademark registration.
• Virtual assistants: If they perform business tasks.
• Bookkeeping services: Monthly bookkeeping fees.

Software and Subscriptions

• Accounting software: QuickBooks, Xero, Wave.
• Amazon integration: Taxomate, A2X, Link My Books.
• Inventory management: SkuVault, Sellbrite, Skubana.
• Research tools: Jungle Scout, Helium 10, Keepa.
• Productivity tools: Microsoft 365, Google Workspace (business portion).
• Communication: Business phone line, Zoom (business portion).

Education and Development

• Amazon courses: If directly related to your business operations.
• Industry conferences: Registration, travel, lodging, meals (at applicable rates).
• Books and publications: Business and industry related.
• Professional memberships: Industry associations.

Often-Missed Deductions

• Bank fees: Monthly account fees, wire transfers, foreign transaction fees, currency conversion fees.
• Credit card fees: Processing fees for website or non-Amazon sales, annual fees on business cards.
• Interest expense: Business credit card interest, business loan interest, line of credit interest.
• Insurance: Product liability insurance, general business insurance, cargo insurance for shipments.
• Bad debt: Uncollectable amounts. Rare for Amazon sellers, but write it off if it happens.
• Return shipping: When you pay for returns outside Amazon’s system.
• Storage outside FBA: Third-party warehouse fees, personal storage unit for inventory.
• Trade show expenses: Registration, travel, booth costs, promotional materials.
• Business meals: 50% deductible when meeting with suppliers, partners, accountants, or for legitimate business purposes.

Deduction Records

Keep documentation for every deduction:

• Receipts (digital is fine. Apps like Expensify or Dext work well.)
• Bank and credit card statements
• Mileage logs
• Home office measurements and expense records
• Notes documenting business purpose for meals and travel

No receipt = no deduction if audited. Use an app or system to capture receipts immediately.

Pro tip: Review your personal credit card and bank statements at year-end. Many sellers miss business expenses they paid personally but forgot to categorize.

Deduction Calculation Example

Here’s what deductions might look like for a $200K revenue Amazon seller:

At a 25% tax rate, that’s $20,177 in tax savings. Miss half of these and you overpay by $10,000.

Choosing the Right Business Entity

Your business structure affects taxes, liability, and complexity. Here’s what Amazon sellers need to know.

Sole Proprietorship

What it is: The default. You and your business are the same legal entity.

Pros:

• No setup cost or paperwork
• Simple tax filing (Schedule C on your personal return)
• Complete control

Cons:

• No liability protection (personal assets at risk)
• Self-employment tax on all profit (15.3%)
• Harder to raise money or sell the business
• Looks less professional

Best for: Testing the waters, very small operations, minimal risk tolerance for paperwork.

Single-Member LLC

What it is: A legal entity separate from you, but taxed as a sole proprietorship by default.

Pros:

• Liability protection (business assets separate from personal)
• Simple tax filing (still Schedule C by default)
• Professional appearance
• Easy to set up ($50-500 depending on state)

Cons:

• Self-employment tax still applies to all profit
• Annual state fees in some states (California charges $800/year)
• Slightly more paperwork

Best for: Most Amazon sellers under $50K profit. You get liability protection without tax complexity.

S-Corporation (or LLC Taxed as S-Corp)

What it is: A tax election that allows you to split income between salary (subject to payroll tax) and distributions (not subject to self-employment tax).

Pros:

• Potential self-employment tax savings
• Salary creates retirement contribution opportunities (SEP IRA, Solo 401k)
• More credible with banks and investors

Cons:

• Must pay yourself “reasonable salary” (you can’t just take distributions)
• Payroll compliance (quarterly filings, W-2s)
• More complex tax return (Form 1120S)
• Higher accounting costs ($1,500-5,000/year extra)

Best for: Amazon sellers with $50K+ in annual profit.

Calculate your potential S-Corp savings:

(This is simplified. Actual savings depend on your specific situation, state taxes, and what “reasonable salary” means for your business. Work with a CPA.)

When to Make the Switch

Signs you should consider S-Corp:

• Profit consistently over $40-50K
• Business is stable (not a side hustle that might end)
• You can afford professional tax help
• You’re reinvesting in the business

The process:

1. Consult with a CPA to model your specific savings
2. Form an LLC if you haven’t already
3. File Form 2553 with the IRS (S-Corp election)
4. Set up payroll (use Gusto, ADP, or similar)
5. Pay yourself a reasonable salary
6. Take remaining profits as distributions

Timing: S-Corp election can be made effective for the current year if filed within 75 days of the year start, or for the following year if filed later.

International Amazon Accounting

Selling internationally adds complexity. Here’s what you need to know about accounting for global Amazon sales.

Selling on Amazon Europe (UK + EU)

VAT basics:

VAT (Value Added Tax) applies to most sales in the UK and EU. Key points:

• VAT rates vary by country (17-27%)
• You must register, collect, and remit VAT in countries where you have obligations
• Registration thresholds vary by country (some are zero for non-EU sellers)
• Amazon’s VAT Calculation Service can help with collection

Accounting for VAT:

VAT is not income. It’s a liability:

• VAT collected: Credit to VAT Payable (liability)
• VAT paid on purchases: Debit to VAT Receivable (asset)
• Net position is what you remit (or reclaim)

Post-Brexit UK:

The UK left the EU VAT system. This means:

• Separate UK VAT registration required
• Different thresholds and rules from EU
• Amazon collects UK VAT on orders under £135

Amazon Canada (GST/HST)

Canadian tax has multiple components:

• GST (5%) applies in all provinces
• HST (13-15%) applies in some provinces (combines GST + provincial)
• PST applies separately in some provinces

Accounting treatment:

Similar to VAT. It’s a liability, not income. You can often reclaim GST/HST paid on Canadian business expenses.

Registration threshold: $30,000 CAD in Canadian revenue over four quarters.

Multi-Currency Accounting

Selling in GBP, EUR, CAD, or other currencies requires conversion to your home currency.

Two approaches:

Transaction date rate:

• Convert each sale at the exchange rate when the sale occurred
• More accurate for financial reporting
• More work to implement
• Generally required for larger businesses

Settlement date rate:

• Convert when Amazon pays you
• Simpler to implement
• Creates timing differences between sale and recognition
• Acceptable for smaller operations

Currency gains and losses:

When exchange rates change between sale and settlement:

• Rate improved: Currency gain (other income)
• Rate declined: Currency loss (other expense)

This is a real economic event. Record it in a Foreign Currency Gain/Loss account.

Automation helps: Taxomate handles multi-currency conversion automatically using appropriate rates for each transaction.

When to Get Specialized Help

You need an international tax specialist if:

• Significant EU/UK sales (over £10K or €10K per month)
• You’re unsure about VAT registration requirements
• You’ve received notices from foreign tax authorities
• You have inventory stored in multiple countries
• You’re expanding into Japan, Australia, or other markets

International tax mistakes can be expensive. The cost of a specialist is usually worth it once you have meaningful overseas volume.

Financial Reports Every Amazon Seller Needs

Your accounting data should produce useful reports. Here are the ones that matter.

Profit and Loss Statement (P&L)

What it shows: Revenue, expenses, and profit over a time period.

Structure:

1. Revenue: Product sales, shipping credits, other income
2. Cost of Goods Sold: Product costs, inbound shipping
3. Gross Profit: Revenue minus COGS
4. Operating Expenses: Amazon fees, advertising, software, payroll, professional services
5. Net Profit: What’s left after all expenses

How often: Review monthly at minimum. Weekly if you’re in a fast-moving growth phase.

What to look for:

• Is gross margin stable, improving, or declining?
• Are any expense categories growing faster than revenue?
• Are you actually profitable, or just cash-flowing?

Balance Sheet

What it shows: What you own (assets), what you owe (liabilities), and owner’s equity at a specific point in time.

Key sections:

• Assets: Cash, accounts receivable, inventory, equipment
• Liabilities: Accounts payable, credit cards, loans, sales tax payable
• Equity: Assets minus liabilities (what you’ve built)

How often: Monthly or quarterly review.

What to look for:

• Is inventory growing faster than sales? (potential cash flow problem)
• Is debt at a sustainable level?
• Is equity growing? (the business is building value)

Cash Flow Statement

What it shows: Where cash came from and where it went during a period.

Why it matters: You can be profitable on paper and still run out of cash. Inventory purchases hit your bank account immediately but don’t show on the P&L until items sell.

Example: Your P&L shows $20K profit for the quarter. But you bought $50K of inventory for next quarter’s growth. Your cash dropped $30K while your P&L looked healthy.

Key insight: Growing businesses often run cash-flow negative while remaining profitable. This is normal but requires planning. Know the difference between profit and cash.

Key Metrics Dashboard

Track these monthly:

Track trends over time. A single month’s number matters less than direction.

Common Amazon Accounting Mistakes (And How to Fix Them)

These mistakes cost Amazon sellers money through overpaid taxes, poor decisions, or both. Avoid them.

Mistake #1: Recording Deposits as Revenue

The error: You see $10,000 hit your bank and record $10,000 in sales revenue.

The problem: Your deposit is revenue MINUS fees, refunds, and deductions. You’re:

• Understating actual revenue
• Missing expense deductions (fees)
• Distorting your profit margin calculations

The fix: Break down every settlement. Record gross revenue in full, then record each fee category and adjustment separately. Automation makes this painless.

Mistake #2: Missing Fee Deductions

The error: Not tracking Amazon fees as deductible expenses, or lumping them into a single catch-all category.

The problem: You’re overpaying taxes. Amazon fees run 25-35% of revenue for most sellers. On $200K revenue, that’s $50-70K in deductible expenses you might be underreporting.

The fix: Categorize every fee type. Record referral fees, FBA fees, storage fees, and advertising separately. Your tax return should show the full deduction.

Mistake #3: Wrong COGS Timing

The error: Recording cost of goods sold when you purchase inventory, not when you sell it.

The problem: Distorted P&L. You show a big expense in the purchase month, then artificially high profits when you actually sell. Monthly statements become meaningless.

The fix: Record inventory as an asset when purchased. Move cost to COGS only when units sell. This matches revenue and expense in the same period.

Mistake #4: Mixing Personal and Business Finances

The error: Using personal bank accounts and credit cards for business expenses.

The problem: Accounting nightmare. You have to sift through personal transactions to find business expenses. You’ll miss deductions. Audits become painful. Potential legal issues if you have an LLC.

The fix: Open dedicated business accounts. If you’ve already mixed things, go through and categorize everything properly. Use the business account exclusively going forward.

Mistake #5: Waiting Until Tax Time

The error: Doing all your bookkeeping in March for the entire previous year.

The problem: Missing receipts, forgotten expenses, no time for tax planning, enormous stress. You can’t make strategic decisions during the year because you don’t know your numbers.

The fix: Monthly bookkeeping. Even two hours per month keeps you current. Use automation to reduce the time required. Review your P&L monthly so there are no surprises.

Mistake #6: Not Reconciling

The error: Trusting your accounting records without verifying against bank statements.

The problem: Errors compound. By year-end, your books don’t match reality. You’ve either missed transactions or double-counted them. Financial statements are unreliable.

The fix: Monthly bank reconciliation. Every transaction in your accounting software should tie to your bank statement. Any difference needs investigation and correction.

When to Hire an Amazon Accountant or Bookkeeper

At some point, doing everything yourself stops making sense. Here’s how to know when, and what to look for.

Signs You Need a Bookkeeper

• Spending more than 4 hours per month on bookkeeping
• Your books are behind by more than two months
• You dread opening your accounting software
• You’ve made categorization errors you caught late
• Revenue over $100K and still doing it yourself

What bookkeepers do: Data entry, transaction categorization, bank reconciliation, basic report preparation.

Cost: $200-800 per month depending on transaction volume and complexity.

Signs You Need an Accountant/CPA

• You’re not confident your books are correct
• You want to minimize taxes, not just file returns
• You’re considering S-Corp election
• You’re selling internationally
• Revenue over $250K
• You’re planning to sell the business or seek investment

What accountants do: Tax planning and preparation, financial statement review, entity structure advice, audit support, strategic guidance.

Cost: $1,500-10,000 per year depending on complexity.

Questions to Ask When Hiring

1. Do you have experience with Amazon and ecommerce sellers?
2. What accounting software do you use?
3. How do you handle Amazon settlement reconciliation?
4. Are you familiar with FBA inventory accounting?
5. How often will we communicate?
6. What’s your typical response time?
7. Who will actually be doing the work on my account?
8. How do you bill? Fixed fee or hourly?

Red flags:

• No ecommerce experience
• Never heard of settlement reports
• Can’t explain how they handle inventory
• Unclear on marketplace facilitator rules
• Vague pricing or scope

Green flags:

• Other Amazon seller clients
• Familiar with Taxomate or similar tools
• Can discuss FBA-specific issues fluently
• Clear communication about process and pricing

For more guidance, read our article on finding the perfect Amazon accountant.

Automating Your Amazon Accounting

Manual Amazon accounting doesn’t scale. Here’s the case for automation.

Manual vs Automated: The Real Comparison

Manual process for each settlement:

• Download reports from Seller Central: 10 minutes
• Open and format in Excel: 15 minutes
• Categorize each line item: 30-60 minutes
• Create journal entries: 20 minutes
• Enter into accounting software: 20 minutes
• Reconcile with bank: 15 minutes
• Total: 2-3 hours every two weeks = 4-6 hours monthly

Automated process for each settlement:

• Review auto-imported transactions: 10 minutes
• Approve and post: 5 minutes
• Reconcile with bank: 10 minutes
• Total: 25 minutes every two weeks = about 1 hour monthly

Monthly time saved: 3-5 hours Annual time saved: 36-60 hours

If your time is worth $50/hour, that’s $1,800-3,000 per year. More than the cost of automation.

Beyond time, automation eliminates data entry errors, ensures consistent categorization, and properly breaks out fees for tax deductions. Manual processes introduce errors; automation doesn’t.

How Taxomate Works

1. Connect to Amazon Seller Central: Secure authorization, read-only access to your data.
2. Automatic settlement import: Every settlement is pulled and parsed automatically.
3. Intelligent categorization: Fees, revenue, refunds split into proper categories.
4. Multi-marketplace support: US, Canada, UK, EU marketplaces handled.
5. Accounting software sync: Direct integration with QuickBooks, Xero, and Wave.
6. Multi-currency handling: Automatic conversion at appropriate rates.

What you get:

• Properly categorized transactions without manual data entry
• Every fee type broken out for accurate expense tracking
• Support for accrual or cash basis accounting
• Bank-reconciliation-ready entries
• Multi-marketplace consolidated in one system

Getting Started

1. Sign up at taxomate.com (free trial available)
2. Connect your Amazon Seller Central account(s)
3. Connect your QuickBooks, Xero, or Wave account
4. Configure account mapping (which Amazon data goes where)
5. Import historical data if you want to catch up
6. Review and approve your first import
7. Set to automatic for ongoing settlements

Setup takes about 30 minutes. After that, each settlement takes 15-25 minutes to review and approve.

Amazon Seller Accounting FAQ

How do I do accounting for my Amazon business?

Start with proper bookkeeping: a separate business bank account, accounting software (QuickBooks or Xero), and a tool like Taxomate to automate Amazon data import. Record all revenue by category, track every fee type as an expense, monitor your cost of goods sold, and reconcile your bank account monthly.

What accounting software is best for Amazon sellers?

QuickBooks Online and Xero are the most popular choices for Amazon sellers. Wave is a solid free option for beginners. The critical factor: choose software that integrates with Amazon through tools like Taxomate. Manual data entry at scale isn’t sustainable.

Should Amazon sellers use cash or accrual accounting?

Cash basis is simpler and works well for most sellers under $1 million in revenue. Accrual basis gives a more accurate picture of profitability by period and is required for businesses over $1M in gross receipts. Start with cash basis and consider switching around $250K revenue or when you need more precise period-over-period analysis.

How do I track Amazon fees in QuickBooks?

Create separate expense accounts for each fee type: referral fees, FBA fulfillment fees, storage fees, advertising fees, and subscription fees. When settlement data imports via Taxomate, each fee is automatically categorized to the correct account. This gives you accurate expense tracking and ensures you’re capturing all deductions.

Do I need an accountant for my Amazon business?

Not necessarily for day-to-day bookkeeping. That can be automated and self-managed with the right tools. But most sellers benefit from a CPA for tax planning and preparation. Especially once profit exceeds $50K or you’re considering S-Corp election. A good CPA pays for themselves in tax savings.

How often should I do Amazon bookkeeping?

Process your settlement data every two weeks when Amazon pays you. Reconcile your bank account and review your P&L monthly. The more current your books, the better your business decisions. And the less painful tax time becomes.

Can I deduct Amazon fees on my taxes?

Absolutely. All Amazon fees are legitimate business expenses: referral fees, FBA fees, storage fees, subscription fees, and advertising. For most sellers, these represent 25-35% of revenue. That’s a significant deduction you should capture in full detail.

How do I handle Amazon refunds in accounting?

Refunds should reduce revenue, not be recorded as an expense. When a customer returns a product, your revenue for that period decreases. In your accounting, refunds are typically netted against gross sales or recorded in a contra-revenue account like “Sales Returns and Allowances.”

What’s the best way to track inventory for FBA?

Combine Amazon’s inventory reports from Seller Central with your accounting software. Track units sent to FBA, units sold, returns by condition (sellable vs unsellable), and units lost or damaged. Calculate COGS using the FIFO method for most accuracy. Inventory management software like SkuVault can help at scale.

How do I reconcile Amazon settlements?

Your bank deposit should equal the net settlement amount after Amazon deducts all fees and applies all credits. Break down each settlement into components: gross revenue, each fee type, refunds, and reimbursements. The sum of these should match your deposit. Any difference needs investigation.

Next Steps

Proper Amazon accounting isn’t optional. It’s how you know whether your business is actually making money. And how you minimize your tax bill legally.

Key takeaways:

• Recording deposits as revenue misses most of the picture. Break down every settlement.
• Amazon fees are 25-35% of revenue. Track them all for tax deductions.
• Your accounting needs scale with your business. $20K side hustles and $1M operations need different systems.
• Automation saves 3-5 hours monthly and eliminates costly errors.
• The right business entity (S-Corp) can save thousands in taxes at $50K+ profit.
• Monthly bookkeeping beats annual tax-time panic every time.

Your action plan:

If you’re just starting:

1. Open a dedicated business bank account
2. Set up Wave or QuickBooks
3. Start tracking every expense from day one
4. Consider Taxomate for automated settlement imports

If you’re established but behind:

1. Get current on bookkeeping (even if it takes a weekend)
2. Set up Taxomate to automate everything going forward
3. Implement monthly reconciliation as a habit
4. Consider a bookkeeper if you’re over $100K revenue

If you’re scaling:

1. Talk to a CPA about S-Corp election
2. Switch to accrual accounting if you haven’t
3. Invest in proper inventory management
4. Plan for cash flow needs. Growth eats cash.

Ready to automate your Amazon accounting and stop spending hours on manual data entry?

Start your free Taxomate trial →

Monthly Accounting Checklist

Use this checklist to stay on top of your Amazon accounting:

Weekly Tasks (15-30 minutes)

• Review and approve Taxomate imports
• Scan and upload any receipts from the week
• Check for unusual transactions or errors

Bi-Weekly Tasks (When Amazon Pays You)

• Verify settlement deposit matches expected amount
• Review imported settlement breakdown
• Approve and post to accounting software
• Investigate any discrepancies

Monthly Tasks (1-2 hours)

• Reconcile all bank accounts
• Reconcile credit card statements
• Review P&L statement
• Check accounts receivable (reimbursements owed)
• Review inventory levels vs. accounting records
• File any required sales tax returns
• Make estimated tax payment if due

Quarterly Tasks (2-4 hours)

• Meet with bookkeeper/accountant to review financials
• Pay quarterly estimated taxes (if applicable)
• Review fee percentages vs. benchmarks
• Analyze profitability by product/category
• Check COGS accuracy
• Update cash flow forecast

Annual Tasks

• Year-end close with accountant
• Gather tax documents
• Review business entity structure
• Assess accounting system. Does it still fit your stage?
• Update chart of accounts if needed
• Purge old records per retention policy (keep 7 years minimum)

Print this checklist or save it somewhere you’ll actually use it. Consistency beats perfection.

Glossary: Amazon Accounting Terms

Quick reference for terms you’ll encounter:

Accrual Accounting: Recording revenue when earned and expenses when incurred, regardless of when cash changes hands.

Cash Basis Accounting: Recording transactions only when money is received or paid.

COGS (Cost of Goods Sold): Direct costs of products sold. Purchase price plus freight, customs, and prep.

Chart of Accounts: The categorization structure for all transactions in your accounting system.

FBA (Fulfillment by Amazon): Amazon’s warehousing and shipping service for sellers.

FIFO (First In, First Out): Inventory costing method where oldest inventory cost is expensed first.

Gross Margin: Revenue minus COGS, expressed as a percentage.

Marketplace Facilitator: Laws requiring marketplaces like Amazon to collect and remit sales tax.

Net Margin: Net profit divided by revenue, expressed as a percentage.

Nexus: A connection to a state that creates tax obligations (physical presence or economic threshold).

P&L (Profit and Loss Statement): Financial report showing revenue, expenses, and profit over a period.

Referral Fee: Amazon’s commission on each sale, varying by category.

S-Corp: Tax election allowing business owners to split income between salary and distributions.

Settlement: Amazon’s bi-weekly payment to sellers, netting all transactions together.

VAT (Value Added Tax): Consumption tax used in the EU, UK, and other countries.

Additional Resources

Official Amazon Resources

• Amazon Seller Central Help: Official documentation
• Amazon Fee Schedule: Current fee rates
• Tax Document Library: Your 1099 and tax forms

IRS Resources

• IRS Publication 334: Tax Guide for Small Business
• IRS Publication 587: Business Use of Your Home
• Form 2553: S-Corporation Election

Taxomate Resources

• Amazon QuickBooks Integration Guide
• Amazon Xero Integration Guide
• A2X Alternative Comparison
• Amazon Bookkeeping Guide

Final Thoughts

Amazon seller accounting isn’t glamorous, but it’s essential. The sellers who know their numbers make better decisions, pay less in taxes, and build more valuable businesses.

The key points from this guide:

1. Stop recording deposits as revenue. Break down every settlement to capture full revenue and all fee deductions.

2. Match your systems to your stage. A $30K side hustle doesn’t need NetSuite, and a $500K business can’t run on spreadsheets.

3. Automate early. The ROI on automation tools is clear within months. Better data, less time, fewer errors.

4. Track every deduction. Amazon fees alone are 25-35% of revenue. Add software, home office, mileage, and professional services. The deductions add up fast.

5. Get the business entity right. S-Corp election can save thousands at $50K+ profit, but the timing and execution matter.

6. Monthly beats annual. Two hours per month keeps you current. Waiting until tax time creates stress, errors, and missed opportunities.

Your accounting system is the foundation of your business intelligence. Build it right, maintain it consistently, and it will pay dividends in every decision you make.

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