Amazon Seller Taxes: The FBA & Marketplace Tax Guide
Short answer: yes — if you sell on Amazon to make a profit, your store is a business to the IRS. You report sales on Schedule C, deduct the cost of inventory as it sells, and pay income tax plus 15.3% self-employment tax on the net profit. Estimate that bill below, then see how FBA income, inventory, quarterly payments, and state sales tax nexus all fit together.
Estimate the Tax on Your Amazon Profit
Prefilled with a $40,000 net-profit scenario typical of a growing FBA store. Enter your own net profit — gross sales minus Amazon fees, cost of goods sold, and shipping — to see your self-employment tax.
Calculate Your Self-Employment Tax
Gross income minus business expenses
Reduces Social Security portion if near wage base
Total Self-Employment Tax
$5,652
Effective SE tax rate: 14.1% of net income
Tax Breakdown
Net SE Income
Your starting amount
Taxable SE Earnings (92.35%)
$40,000 x 0.9235
Social Security Tax (12.4%)
On $36,940 (wage base: $168,600)
Medicare Tax (2.9%)
On all SE earnings (no cap)
Total Self-Employment Tax
Deductible Half (reduces AGI)
You deduct 50% of SE tax from income
How Self-Employment Tax Works
Step 1:Multiply net SE income by 92.35% to get taxable SE earnings. This adjustment accounts for the "employer" half of FICA.
Step 2: Apply 12.4% Social Security tax on earnings up to $168,600 (minus any W-2 wages already taxed).
Step 3: Apply 2.9% Medicare tax on all SE earnings (no cap). Add 0.9% Additional Medicare Tax on earnings over $200,000.
Step 4: Deduct half of the total SE tax from your adjusted gross income on Form 1040.
The whole picture in four lines
- 1. Gross sales — everything Amazon processed, including shipping and the sales tax it remitted for you, shows up on your 1099-K and on Schedule C line 1.
- 2. Minus COGS & expenses — the cost of the units you actually sold, Amazon fees, inbound shipping, and supplies. Most of the gross disappears here.
- 3. Net profit— the number you're taxed on. Income tax + 15.3% self-employment tax both apply to it.
- 4. Quarterly payments — if you'll owe $1,000+, the IRS wants it in four installments, not one April lump sum.
Reporting Amazon FBA Income on Schedule C
Amazon income is business income, so it goes on Schedule C, the same form every freelancer and side hustler uses. One thing that surprises new sellers: the gross figure on your 1099-K is bigger than your Amazon payouts. It includes the shipping buyers paid, the sales tax Amazon collected and remitted, and the fees Amazon deducted before depositing your money — none of which is profit.
You report the full gross on line 1, then deduct it all back out below: referral and FBA fees, storage fees, advertising, inbound shipping, and the cost of goods sold. Amazon's Date Range and fee reports give you the numbers; the 1099-K just confirms the gross the IRS already sees.
Under the threshold and no 1099-K? The income is still taxable — the form is only how a payer reports to the IRS. See the 1099-K explained for how to reconcile the gross number against your payouts.
Inventory: Deducted When It Sells, Not When You Buy It
This is the single biggest tax surprise for FBA sellers. The money you spend buying stock is not deductible the moment you buy it. Inventory becomes a deduction — cost of goods sold (COGS) — only when the units actually sell.
- Buy 1,000 units at $10, sell 600 this year — you deduct $6,000 of COGS now. The other $4,000 of unsold stock stays on your books and is deducted in the year it sells.
- Landed cost counts. Your COGS includes the product price plus inbound freight, import duties, and prep costs to get the units sale-ready.
- Fees and overhead are separate.Amazon referral/FBA fees, PPC advertising, software, and a home office are ordinary expenses you deduct in full the year you incur them — they're not part of inventory.
Small businesses can often use simplified inventory rules that let them expense stock as non-incidental materials when sold or used, but the timing principle is the same: match the deduction to the sale. See the deduction estimator for how the rest of your write-offs stack up.
Self-Employment Tax on Amazon Earnings
On top of regular income tax, net profit from your store gets hit with 15.3% self-employment tax — 12.4% Social Security plus 2.9% Medicare, charged on 92.35% of net profit. A W-2 employee splits this with an employer; as a seller you're both the worker and the “employer,” so you cover both halves. The filing trigger is low: $400 of net profit means you owe SE tax and must file.
Because SE tax applies to netprofit, every dollar of COGS, fees, and advertising you deduct lowers it directly. A store that grosses $120,000 but spends $80,000 on inventory and Amazon fees only pays SE tax on the roughly $40,000 that's left — not the gross. You also deduct half of the SE tax itself from your adjusted gross income.
State Sales Tax Nexus: Amazon Usually Handles It
Sales tax and income tax are two different things — and for Amazon sales, the sales tax side is largely off your plate. Every state with a sales tax now has a marketplace facilitator lawthat makes Amazon, not the individual seller, responsible for collecting and remitting sales tax on marketplace transactions. So for sales that run through Amazon, you generally don't register or file sales tax returns yourself.
Nexus still matters in a few situations:
- Other sales channels.If you also sell on your own Shopify site or wholesale, you're the collector there, and economic-nexus thresholds (often $100,000 in sales or 200 transactions per state) decide where you must register.
- FBA inventory in a state. Amazon storing your stock in a warehouse can create physical nexus, which a handful of states treat as a registration trigger even for marketplace sellers.
- Income tax is separate.Your Amazon profit is still subject to your home state's income tax regardless of who remits the sales tax.
Software like TaxJar or Avalara can map where you have nexus if you sell off-Amazon; if Amazon is your only channel, sales tax is usually a non-issue. When it's unclear, confirm your states with a CPA.
Quarterly Estimated Payments for Sellers
Amazon withholds nothing from your payouts, so the IRS expects you to pay as you go through quarterly estimated payments. If you expect to owe $1,000 or more for the year, four payments replace one April lump sum:
| Income period | Payment due |
|---|---|
| Jan 1 – Mar 31 (Q1) | April 15 |
| Apr 1 – May 31 (Q2) | June 15 |
| Jun 1 – Aug 31 (Q3) | September 15 |
| Sep 1 – Dec 31 (Q4) | January 15 (next year) |
The simplest habit: move 25–30% of profitinto a separate account and pay it out each quarter. Sellers with a W-2 job can raise that job's withholding to cover the store instead. Size each payment with the quarterly tax calculator, and see the safe-harbor rules at estimated tax payments.
Amazon vs. Etsy vs. eBay Tax Differences
The core tax treatment is identical across all three: profit goes on Schedule C and carries the 15.3% self-employment tax. The differences are in the details of inventory, fees, and what each platform handles for you.
| Topic | Amazon (FBA) | Etsy | eBay |
|---|---|---|---|
| Typical inventory | Resale stock — big COGS, tracked as sold | Handmade materials — expensed as supplies | Resale or used goods — COGS on what sells |
| Sales tax | Amazon collects & remits | Etsy collects & remits | eBay collects & remits |
| 1099-K | $600 threshold from 2026 (per platform) | Same $600 threshold | Same $600 threshold |
| SE tax | 15.3% on net profit | 15.3% on net profit | 15.3% on net profit |
The biggest practical gap: Amazon and eBay resellers carry real inventory that must be deducted as it sells, while a handmade Etsy shop mostly expenses raw materials as supplies. If you sell across more than one platform, each sends its own 1099-K, but it all lands on a single Schedule C. Compare the handmade angle on the Etsy seller taxes guide.
Software That Makes Seller Taxes Easier
You don't need software to file, but the right tools save hours of reconciling Amazon reports. Sellers commonly reach for:
- Bookkeeping — QuickBooks or Xero to pull Amazon settlements, track COGS, and categorize fees.
- Sales tax mapping — TaxJar or Avalara if you sell off-Amazon and need to know where you have nexus.
- Filing — TurboTax Self-Employed or a CPA to put the Schedule C and Schedule SE together.
These are common tools, not endorsements — pick what fits your volume and comfort with bookkeeping.
Run Your Own Numbers
Once you have gross sales, COGS, and fees, plug the net into the side hustle tax calculator to stack Amazon profit on any W-2 wages, or use the Schedule C calculator to split the SE tax and income tax for the store alone. The lower your net profit, the lower every tax on this page.
Educational only — not tax advice. 1099-K thresholds and inventory rules change; confirm the current requirements on irs.gov or with a CPA before filing.
Frequently Asked Questions
Do I need to pay taxes on Amazon sales?
Yes, if you're selling to make a profit. The IRS treats an Amazon FBA or marketplace business like any other self-employment: you report gross sales on Schedule C, subtract your cost of inventory, Amazon fees, and shipping, and pay income tax plus 15.3% self-employment tax on the net profit. There's no dollar amount that makes Amazon income tax-free — even $400 of net profit triggers the self-employment tax filing requirement. The only exception is a genuine hobby run without a profit motive, where the income is still reportable but you can't deduct expenses against it.
Will Amazon send me a 1099-K?
Amazon issues a 1099-K through its payment processor once your unadjusted gross sales cross the federal reporting threshold: $5,000 for 2024, $2,500 for 2025, and $600 from 2026 onward. The threshold is per platform, based only on your Amazon sales. Important: it decides whether Amazon mails the form, not whether you owe tax. If you netted a profit and never got a 1099-K because you were under the threshold, that income is still fully taxable and still belongs on your Schedule C.
How do I deduct the inventory I bought for Amazon?
Inventory isn't deducted when you buy it — it's deducted as cost of goods sold (COGS) when it sells. If you buy 1,000 units for $10 each and sell 600 by year-end, you deduct $6,000 (the cost of the units sold), and the remaining $4,000 of unsold stock stays on your books as inventory to deduct in a future year. This trips up a lot of new FBA sellers who expect to write off a big January inventory buy all at once. Small businesses that treat inventory as non-incidental materials and supplies can sometimes deduct it when sold or used under simplified rules, but the sold-not-purchased principle still governs the timing.
Do I have to collect sales tax on Amazon sales?
In almost all cases Amazon collects and remits state sales tax for you. Every state with a sales tax now has a marketplace facilitator law that makes Amazon — not the individual seller — responsible for collecting and remitting tax on marketplace sales. So for sales that go through Amazon, you generally don't file sales tax returns yourself. Nexus still matters if you sell on other channels (your own website, wholesale) where you're the one collecting, or where holding FBA inventory in a state creates a filing obligation. When in doubt, confirm your states with a sales tax tool or a CPA.
Do Amazon sellers have to pay quarterly taxes?
If you expect to owe $1,000 or more in tax for the year on your Amazon profit, the IRS wants the money in four estimated installments rather than a lump sum in April. The deadlines are April 15, June 15, September 15, and January 15. Amazon withholds nothing from your payouts, so skipping a quarter triggers an underpayment penalty even if you pay in full at filing. A simple habit: set aside 25–30% of profit into a separate account and pay it out each quarter. Sellers with a W-2 day job can instead raise that job's withholding to cover the store.
Is selling on Amazon a hobby or a business?
It's a business if you run it to make a profit — sourcing inventory, managing listings, reinvesting, and keeping records. The IRS weighs factors like whether you depend on the income, operate in a businesslike way, and have turned or expect to turn a profit. The distinction matters: a business files Schedule C and deducts all its expenses, while hobby income is reported with no expense deductions allowed since 2018. Most active FBA and arbitrage sellers who restock and aim to grow are running a business and should file Schedule C.