Tax Guide for Amazon FBA Sellers
Tax Deductions for Amazon FBA Sellers (2026)
Amazon takes a cut from every sale: referral fees, FBA fulfillment fees, storage fees, advertising costs, and more. Almost all of them are tax-deductible. The tricky part is knowing what belongs in Cost of Goods Sold versus operating expenses, and which Schedule C line each fee maps to. This guide walks through it all.
Key Takeaways
- Amazon deposits are net payouts (after all fees and refunds). You must report the gross 1099-K amount on Schedule C Line 1, then deduct fees separately.
- Amazon referral fees (8 to 15% per sale) go on Schedule C Line 10. On a typical $24.99 product, Amazon takes approximately $7.20 in combined fees before advertising.
- Amazon PPC advertising is often the second-largest expense after COGS, with many sellers spending 10 to 30% of revenue. All PPC costs go on Line 8 (Advertising).
- Referral fees, PPC ads, storage fees, and software subscriptions do not belong in COGS. They are operating expenses in Part II.
If you sell products through Amazon FBA (Fulfillment by Amazon), you're self-employed. That means you file a Schedule C (Profit or Loss from Business) as part of your personal tax return. Your gross sales go on Line 1, your deductible expenses go in Parts II and III, and you pay income tax plus self-employment tax (15.3%) only on the net profit.
The problem most FBA sellers face isn't that they have too few deductions. It's that Amazon's fee structure is complex, settlement reports are dense, and it's unclear what counts as Cost of Goods Sold versus an operating expense. Get this wrong, and you either overpay on taxes or miscategorize expenses in a way that invites IRS scrutiny.
Let's break it down, fee by fee.
How Amazon Payouts Show Up on Your Bank Statements
Before we dig into deductions, let's address a fundamental issue: what you see in your bank account is not your gross revenue. Amazon pays you via ACH deposit every two weeks (or daily, if you've enrolled in daily disbursements), and the deposit amount is your sales minus all Amazon fees, refunds, and adjustments. The bank deposit is the net payout, not the top line.
Common deposit descriptors you'll see on your bank statement:
| Statement Description | What It Is |
|---|---|
| AMAZON PAYMENTS INC | Standard seller payout (buyer paid before shipment) |
| AMAZON SERVICES LLC | Seller payout (buyer paid after shipment) |
| AMZN SELLER PAYOUT | ACH deposit of your disbursement balance |
| AMAZON.COM SELLER | Seller account deposit (varies by bank) |
| AMZN MKTP US | Sometimes used for seller deposits; also used for buyer charges |
| AMAZON ADVERTISING | Advertising charges if billed to your credit card separately |
This is critical for tax reporting: If Etsy and Amazon both send you 1099-Ks, those forms report your gross sales (the total customers paid), not the net amount deposited in your bank. You must report the gross amount on Schedule C Line 1, then deduct fees and expenses separately. If you only report the bank deposits as income, you're understating your gross receipts, which is a red flag the IRS looks for.
Understanding the Amazon Settlement Report
Your Amazon settlement report (found in Seller Central under Payments, then Statements) is the single most important document for your taxes. It breaks down every transaction in a settlement period: sales, refunds, fees, and adjustments.
Here are the key columns and fee types you'll see:
| Settlement Report Field | What It Represents |
|---|---|
| Product Sales | Gross amount customers paid for your items (before any fees) |
| Shipping Credits | What customers paid for shipping (if you charge for it) |
| Promotional Rebates | Discounts Amazon funded (coupons, Lightning Deals your portion) |
| Selling Fees | Referral fees (the percentage Amazon charges per category) |
| FBA Fees | Fulfillment fees: pick, pack, ship, and weight handling per unit |
| Other Transaction Fees | Subscription fees, high-volume listing fees, refund administration |
| Other | Storage fees, disposal fees, removal order fees, inbound transportation |
| Total | Net amount deposited to your bank account |
For tax purposes, you want to pull the totals for each fee category across all settlement periods in the calendar year. Tools like A2X, Link My Books, or Seller Ledger can automate this. If you prefer manual tracking, download each settlement CSV and sum the relevant columns in a spreadsheet.
Every Amazon Fee That's Deductible (and Where It Goes on Schedule C)
Nearly every fee Amazon charges is a legitimate, 100% tax-deductible business expense. Here's the full breakdown with the correct Schedule C placement.
Referral Fees: 8-15% of the sale price (most categories 15%)
Amazon's commission for each sale. The percentage varies by product category: most categories pay 15%, but some like consumer electronics are 8%, grocery is 8-15%, and Amazon device accessories are 45%. On a $25 product in a standard category, that's $3.75 per unit.
Schedule C: Line 10 (Commissions and Fees). This is a commission paid to a platform for facilitating the sale.
FBA Fulfillment Fees: $3.22-$10+ per unit (varies by size and weight)
Amazon charges per-unit fees for picking, packing, and shipping your products from their fulfillment centers. A small standard-size item (under 1 lb) costs roughly $3.22 to fulfill. Large or heavy items can cost $10 or more. These fees also include return processing for items in categories with free returns.
Schedule C: Line 27a (Other Expenses, labeled “Fulfillment Fees”). Some accountants place these in COGS Part III, Line 39 (Other Costs) since they are directly tied to delivering each unit sold. Either approach is defensible; just be consistent year to year.
Monthly Storage Fees: $0.56-$2.40 per cubic foot
Amazon charges for the warehouse space your inventory occupies. Standard rates run $0.56-$0.87 per cubic foot per month from January through September, jumping to $1.20-$2.40 per cubic foot during October through December (peak season). If you carry a lot of inventory or have slow-moving SKUs, storage fees can add up fast.
Schedule C: Line 20b (Rent or Lease, Other Business Property). You're renting warehouse space from Amazon.
Aged Inventory Surcharge (formerly Long-Term Storage Fees)
Inventory sitting in Amazon warehouses for over 181 days incurs an additional surcharge on top of regular monthly storage. Items aged 271-365 days cost more, and anything over 365 days gets the highest surcharge. This is Amazon's incentive for you to move stale inventory.
Schedule C: Line 20b (Rent or Lease, Other Business Property), same as regular storage. Alternatively, Line 27a (Other Expenses, labeled “Storage Surcharges”).
Amazon PPC Advertising (Sponsored Products, Brands, Display)
Amazon PPC (pay-per-click) advertising is how most FBA sellers drive visibility. You bid on keywords, and Amazon charges you per click. Average cost-per-click ranges from $0.50 to $2.00+ depending on category competition. Many FBA sellers spend 10-30% of revenue on PPC, making this one of the largest expense categories after COGS.
Schedule C: Line 8 (Advertising). This is straightforward: it's advertising.
Professional Seller Subscription: $39.99/month
The monthly fee for a Professional seller account (required for most serious FBA sellers). Individual seller accounts pay $0.99 per item sold instead. Either way, the cost is deductible.
Schedule C: Line 27a (Other Expenses, labeled “Platform Subscriptions”).
Inbound Placement Service Fee
When you send inventory to Amazon and they distribute it across multiple fulfillment centers, Amazon charges for that distribution. You can reduce this fee by shipping to multiple destinations yourself, or pay Amazon to handle the placement.
Schedule C: Part III, Line 39 (COGS, Other Costs) if you treat inbound shipping as a cost of acquiring inventory. Alternatively, Line 27a (Other Expenses).
Removal and Disposal Fees
When you want Amazon to return unsold inventory to you or dispose of it, they charge per unit. Removal orders are typically $0.50-$1.00+ per unit depending on size.
Schedule C: Line 27a (Other Expenses, labeled “Inventory Removal/Disposal”).
Refund Administration Fee
When a customer returns an item and Amazon processes the refund, Amazon keeps a portion of the original referral fee. The fee is the lesser of $5.00 or 20% of the referral fee for that item. So you get most of the referral fee back, but not all of it.
Schedule C: Line 10 (Commissions and Fees), grouped with your other referral fees.
Real Example: Fee Breakdown on a $25 Product Sale
Let's say you sell a small kitchen gadget for $24.99 in the Home & Kitchen category (15% referral fee). The item weighs 10 ounces and is standard size. Here's what Amazon takes:
| Fee | Calculation | Amount |
|---|---|---|
| Referral fee | 15% of $24.99 | $3.75 |
| FBA fulfillment fee | Small standard, 10 oz | $3.42 |
| Monthly storage | ~0.05 cubic ft for 30 days | $0.03 |
| PPC advertising (if running ads) | ~$1.00 avg CPC, 1 click per sale | $1.00* |
* PPC costs vary widely. Some products convert with minimal ad spend; others require $3-5+ in advertising per sale.
Without PPC: Amazon takes $7.20 in fees on a $24.99 sale (about 29%). With PPC advertising, total fees can reach $8.20 or more (33%). That's before you account for the cost of the product itself. Every one of those fees is deductible, and on a seller doing $100,000 in annual revenue, Amazon fees alone can easily total $30,000-40,000.
COGS Calculation: What Belongs in Cost of Goods Sold
For most Amazon FBA sellers, Cost of Goods Sold is the single largest deduction. COGS goes on Schedule C Part III and includes the direct costs of acquiring or producing the products you sold during the year. This is not the same as your total inventory purchases; it's only the cost of items that actually sold.
What Goes Into COGS (Part III)
- •Product purchase price (what you paid your supplier or manufacturer)
- •Freight and shipping to get inventory to your location or to Amazon's warehouses
- •Customs duties and import fees (if sourcing internationally)
- •Product packaging that's part of the finished product (branded boxes, inserts, labels)
- •Manufacturing costs if you produce your own products
- •Product inspection and quality testing fees
What Does NOT Go Into COGS (Goes in Part II Instead)
- •Amazon referral fees (Line 10, Commissions)
- •Amazon PPC advertising (Line 8, Advertising)
- •Storage fees (Line 20b, Rent)
- •Home office expenses (Line 30)
- •Software subscriptions (Line 27a)
- •Office supplies and shipping supplies (Line 22)
The COGS Formula (Schedule C Part III):
Beginning inventory (Jan 1 value)
+ Purchases during the year
+ Freight-in / shipping to Amazon
+ Other costs (duties, inspection fees)
- Ending inventory (Dec 31 value)
= Cost of Goods Sold
Example: You start the year with $8,000 in inventory. During the year you purchase $45,000 in new inventory, pay $5,000 in freight, and $2,000 in customs duties. At year-end you have $12,000 in unsold inventory. Your COGS is $8,000 + $45,000 + $5,000 + $2,000 - $12,000 = $48,000.
Inventory Accounting for FBA Sellers
If you carry inventory (which almost all FBA sellers do), the IRS expects you to account for it properly. The good news: most small FBA sellers qualify for simplified methods that keep this manageable.
Small Business Exception (Section 263A)
Section 263A (the Uniform Capitalization, or UNICAP, rules) normally requires businesses to capitalize certain indirect costs into inventory. However, if your average annual gross receipts for the prior three tax years are $29 million or less (indexed for inflation), you're exempt. Almost every individual FBA seller qualifies for this exception, which means you can use simpler inventory accounting methods.
Inventory Valuation Methods
You'll need to pick an inventory valuation method and stick with it. The most common options for FBA sellers:
- •Cost method: Value inventory at what you paid for it. Simplest and most common.
- •Lower of cost or market: Value each item at the lower of what you paid or current market value. Useful if you have items that have dropped in value.
- •FIFO (First In, First Out): Assumes the oldest inventory sells first. Common for FBA sellers who reorder the same products.
Counting Inventory at Year-End
You need to know the value of unsold inventory on December 31. For FBA sellers, this includes inventory in Amazon's warehouses (check your FBA Inventory Report in Seller Central), inventory in transit to Amazon, and inventory at your home or prep center. Multiply the unit count by your per-unit cost (purchase price plus freight/duties allocated per unit) to get your ending inventory value.
Returns and Refunds: How They Affect Your Taxes
Amazon's generous return policy means FBA sellers deal with a lot of returns. Here's how to handle them for tax purposes:
Refunds reduce your gross income.
When a customer returns an item and gets a refund, that sale is reversed. Your gross revenue on Schedule C Line 1 should reflect net sales (total sales minus refunds). Your settlement report handles this automatically, as refunds are deducted from your payouts. If you're reconciling from a 1099-K (which reports gross), make sure to deduct returns and refunds on Line 2 (Returns and Allowances).
Amazon refunds most (but not all) of your fees.
When a refund is issued, Amazon returns most of the referral fee but keeps a refund administration fee (the lesser of $5.00 or 20% of the referral fee). FBA fulfillment fees are generally not refunded because Amazon already shipped the item. Both the administration fee and the non-refunded fulfillment fee are still deductible expenses.
Returned inventory may be unsellable.
If a returned item is damaged and Amazon classifies it as “unfulfillable,” you've lost the cost of that product. You can either have the item removed (and pay the removal fee) or have Amazon dispose of it. Either way, the cost of that inventory is part of your COGS (it was “sold” and then lost). The removal or disposal fee is a separate deductible expense on Line 27a.
Amazon reimbursements for lost/damaged inventory.
If Amazon loses or damages your inventory in their warehouse, they'll reimburse you (usually at a calculated fair market value). These reimbursements are income and should be included in your gross receipts. They'll appear in your settlement report as “Other” transaction types.
Deductions Beyond Amazon Fees
Amazon fees and COGS are the big items. But FBA sellers have plenty of other deductible expenses that often get overlooked.
Home Office / Prep Space
If you use part of your home exclusively and regularly for your FBA business (prepping inventory, managing your Seller Central account, photographing products), you qualify for the home office deduction. The simplified method gives you $5 per square foot, up to 300 square feet ($1,500 max). The regular method (Form 8829) lets you deduct a percentage of rent, mortgage interest, utilities, and insurance based on the square footage of your dedicated space.
Schedule C: Line 30 (Business Use of Home).
Software and Tools
FBA sellers rely on software for product research, repricing, inventory management, and bookkeeping. Common tools include Helium 10, Jungle Scout, Keepa, Tactical Arbitrage, RestockPro, InventoryLab, QuickBooks, and A2X. All subscription costs are deductible.
Schedule C: Line 18 (Office Expenses) or Line 27a (Other Expenses).
Shipping and Prep Supplies
Boxes, poly bags, bubble wrap, FNSKU labels, label printers, tape, and other supplies used to prep and ship inventory to Amazon. These are operating expenses, not COGS, because they're for fulfillment rather than the product itself.
Schedule C: Line 22 (Supplies).
Mileage and Vehicle Expenses
Drives to retail stores for arbitrage sourcing, trips to the UPS or post office for inbound shipments, visits to your prep center, and travel to trade shows are all deductible business miles. The 2025 standard mileage rate is 70 cents per mile (72.5 cents for 2026). Retail arbitrage sellers in particular should track mileage carefully, as the deduction can be substantial.
Schedule C: Line 9 (Car and Truck Expenses).
Phone and Internet
The business-use percentage of your phone and internet bills. If you use your phone for sourcing (scanning apps), managing your seller account, communicating with suppliers, and running ads, a 50-70% business-use allocation is reasonable for an active FBA seller.
Schedule C: Line 25 (Utilities) for internet. Line 27a (Other Expenses) for phone.
Product Photography and Graphic Design
Professional product photos, lifestyle images, A+ Content design, and listing graphic creation are deductible. If you hire a photographer or designer on Fiverr or Upwork, that's a deductible contractor expense. If you buy equipment (lightbox, camera, backdrop), that's deductible as supplies or depreciation.
Schedule C: Line 11 (Contract Labor) for hired help. Line 22 (Supplies) for equipment under $2,500.
Education and Training
FBA courses, coaching programs, masterminds, Amazon seller conferences, books about e-commerce or sourcing. As long as it improves your existing business skills (not qualifying you for a new profession), it's deductible.
Schedule C: Line 27a (Other Expenses, labeled “Education/Training”).
Professional Services
Accountant or CPA fees, bookkeeping services, legal consultation (trademark filing, entity structuring), virtual assistants, and prep center services.
Schedule C: Line 17 (Legal and Professional Services) or Line 11 (Contract Labor).
Commonly Missed Deductions for FBA Sellers
These are the write-offs that FBA sellers leave on the table most often. They're all legitimate; they just don't always feel like “real” deductions.
1. Inbound shipping to Amazon
UPS, FedEx, or Amazon's partnered carrier costs to ship your inventory to fulfillment centers. This is either COGS (freight-in) or an operating expense, but either way it's deductible. Many sellers forget to track shipping costs they pay out of pocket.
2. Product samples from suppliers
Samples you order to evaluate before placing a bulk order are a deductible business expense, even if you decide not to sell the product. These go on Line 22 (Supplies) or Line 27a.
3. Inventory lost or damaged by Amazon
Amazon sometimes loses or damages inventory and doesn't automatically reimburse you. Use reimbursement audit tools (like GETIDA or Seller Investigators) to file claims. The cost of lost inventory that isn't reimbursed is included in your COGS (it left your inventory but generated no revenue). The audit tool subscription itself is deductible.
4. Bank and payment processing fees
If you use Payoneer, Wise, or another service to receive payments (common for international sellers), those transaction and conversion fees are deductible. Business bank account monthly fees also qualify.
5. Amazon Subscribe & Save fees
If you enroll products in Subscribe & Save, Amazon charges an additional fee (typically 5-10% discount funded by you). That discount cost is a deductible selling expense.
6. Tax preparation fees
The portion of your tax prep cost attributable to your Schedule C is deductible as a business expense. If your accountant spends half their time on your FBA business, half the fee is deductible.
7. Sales tax collected and remitted
While Amazon collects and remits sales tax in marketplace facilitator states, if you sell on other platforms or your own website and collect sales tax yourself, the remitted amount is a cost of doing business. However, the tax itself is generally not deductible on Schedule C (it's a pass-through). What is deductible is the cost of sales tax compliance software (TaxJar, Avalara) on Line 27a.
Quick Reference: Amazon FBA Deductions at a Glance
| Expense | Schedule C Location |
|---|---|
| Referral fees (Amazon commission) | Line 10 (Commissions and Fees) |
| FBA fulfillment fees | Line 27a (Other Expenses) or COGS Part III |
| Monthly and long-term storage fees | Line 20b (Rent/Lease, Other Business Property) |
| Amazon PPC advertising | Line 8 (Advertising) |
| Professional seller subscription ($39.99/mo) | Line 27a (Other Expenses) |
| Inbound placement and shipping to Amazon | COGS Part III (freight-in) or Line 27a |
| Removal and disposal fees | Line 27a (Other Expenses) |
| Product cost (purchase price from supplier) | COGS Part III |
| Customs duties and import fees | COGS Part III |
| Shipping and prep supplies (boxes, labels, poly bags) | Line 22 (Supplies) |
| Software tools (Helium 10, Jungle Scout, A2X, etc.) | Line 18 (Office Expenses) or Line 27a |
| Home office / prep space | Line 30 (Business Use of Home) |
| Phone and internet (business %) | Line 25 (Utilities) / Line 27a |
| Mileage (sourcing, shipping, trade shows) | Line 9 (Car and Truck Expenses) |
| Product photography and graphic design | Line 11 (Contract Labor) or Line 22 |
| Professional services (accountant, legal) | Line 17 (Legal and Professional Services) |
| Education and FBA courses | Line 27a (Other Expenses) |
| Business insurance | Line 15 (Insurance) |
| Bank and payment processing fees | Line 27a (Other Expenses) |
Record-Keeping Tips for FBA Sellers
Good records aren't optional when you're running an inventory-based business. Here's what to track and how.
Download settlement reports every period.
Your settlement report is the authoritative source for Amazon fees. Download the CSV from Seller Central (Payments, then Statements) for each settlement period. Alternatively, connect a tool like A2X or Link My Books to automate the categorization.
Keep supplier invoices.
Every product purchase should have a corresponding invoice showing the quantity, unit cost, shipping charges, and supplier details. If you source from Alibaba or 1688, save the order confirmation and payment receipts. If you do retail arbitrage, photograph receipts or use an app to scan them.
Track inventory counts at year-end.
On December 31, pull your FBA Inventory Report and any inventory at your home or prep center. Multiply units by per-unit cost to get your ending inventory value. This number goes on Schedule C Part III, Line 41.
Separate business and personal spending.
You don't legally need a separate business bank account as a sole proprietor, but it makes categorizing expenses dramatically easier. At minimum, use a dedicated credit card for inventory purchases.
Save advertising reports.
Download your Amazon Advertising reports periodically. These show your total ad spend, which should match Line 8 on your Schedule C. PPC charges appear in your settlement report, but having the advertising reports as backup documentation is good practice.
How Amazon FBA Compares to Other Marketplace Sellers
If you also sell on other platforms, the tax principles are the same (report gross revenue, deduct fees and expenses on Schedule C), but the specific fees and their categorization differ. Amazon's fee structure is heavier on fulfillment and storage costs, while platforms like Etsy lean more toward transaction and payment processing fees.
If you sell on Etsy as well, check out our Etsy Seller Tax Deductions guide for a similar fee-by-fee breakdown tailored to that platform. The COGS rules and home office deduction work the same way regardless of which marketplace you use.
The Bottom Line
Running an Amazon FBA business means dealing with a constant stream of fees: referral fees on every sale, fulfillment fees on every shipment, storage fees every month, and PPC costs that can rival your product costs. Individually, each fee feels like just part of doing business. Collectively, they can total 30-40% of your gross revenue, and every dollar is deductible.
The biggest mistake FBA sellers make at tax time isn't forgetting one large deduction. It's not properly categorizing thousands of small fees, mixing up COGS with operating expenses, or reporting only bank deposits instead of gross revenue. Getting the details right on your Schedule C can save you thousands in taxes and self-employment tax.
If you want help mapping your bank and credit card transactions to the right Schedule C categories, that's exactly what Categorize My Expenses does. Upload your bank statement CSV, and it sorts transactions like AMAZON PAYMENTS INC, AMZN SELLER PAYOUT, UPS, ALIBABA, and HELIUM 10 into the correct tax categories automatically.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or financial advice. Tax rules change, and individual situations vary. Consult a qualified tax professional for advice specific to your situation. Amazon fee structures referenced are current as of early 2026 and may change. Check Amazon Seller Central for the latest fee schedules. Categorize My Expenses is a financial data organization tool. It is not a tax preparer and does not provide tax advice.
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