Do I Have To Report Amazon Sales On My Taxes Sunken Stone

Quick—Do I Have To Report Amazon Sales On My Taxes in ’22?

By Published On: February 17th, 2022Categories: Accounting, Taxes and Fees

Do I have to report Amazon sales on my taxes?

Yes, you must report the income you take home as an Amazon Seller on your taxes. In fact, Amazon provides sellers that make over $20,000 or conduct 200 or more transactions with a 1099-K. Thus, the IRS will expect to see matching reporting on your tax returns confirming your income as an Amazon Seller.

Taxes are an inevitable part of doing business, whether you sell online or at a physical store. For Amazon sellers, especially new sellers, taxes can be a bit of a mystery than it is for other online retailers. Today, we’re answering the question, “Do I have to report Amazon sales on my taxes?”

As a new Amazon seller, you might be wondering if you’re required to pay income taxes on your Amazon earnings and file a report to the Internal Revenue Service. This post will discuss Amazon seller tax obligations to help you navigate the tax waters and avoid penalties.

Read on to learn more about the forms you’ll need to write about reporting Amazon seller taxes and ensure you don’t miss things when you complete your taxes.

do i have to report amazon sales on my taxes

Do I Have To Report Amazon Sales On My Taxes?

The short answer is YES. Amazon sellers must report their Amazon sales as income on their taxes.

Internal Revenue Service (IRS) regulations require Amazon to file a 1099-K form for Amazon sellers who earn more than $20,000 in unadjusted gross sales and make more than 200 individual transactions per calendar year.

If you meet these requirements, Amazon will send you a 1099-K form by January 31. Even if you don’t meet the two needs, but you’re a professional seller; or an individual seller with at least 50 transactions, you’re still required to provide your tax information to Amazon.

However, this is not an IRS requirement. Amazon requires you to provide your tax information so that they have every seller’s tax information as part of complying with IRS regulations.

If you fail to submit your tax information to Amazon, you stand to lose your Amazon seller status.

NOTE: Beginning in 2022, selling as little as $600 worth of products on Amazon will prompt Form 1099-K. According to the new 1099-K tax reporting requirements that will come into effect in 2022, Amazon sellers who earn $600 or more in gross sales will receive a Form 1099-K, regardless of the number of individual payments or transactions.

Did Your Small Business Transition To Amazon? Learn About Amazon Seller Tax

If you run a small business and have decided to sell on Amazon, you’ll need to grasp Amazon seller tax obligations to avoid penalties and tax audits. Besides, knowing how Amazon seller tax works will help you keep up with your taxes on time.

>> TAKE THE SUCCESS QUIZ NOW: This 2-Minute Quiz Accurately Predicts Whether Your Brand Has What It Takes To Succeed On Amazon Today

Amazon Seller Tax Obligations Explained

This section will walk you through what Amazon sellers need to know about filing taxes.

What Is Form 1099-K?

Tax Form 1099-K is an IRS form that tracks income received through third-party payment methods or payment card transactions. You should report your process transactions for retailers or other third parties, those transactions for the year on Form 1099-K.

Businesses complete form 1099-K for sellers when they earn more than $20,000 in unadjusted gross sales and have more than 200 transactions per calendar year. 

However, some third-party settlement entities can send a 1099-K form to vendors who’ve not met the $20,000 threshold and have only processed a handful of transactions.

The IRS requires third-party settlement entities to send their vendors a Form 1099-K by January 31.

For Amazon sellers, the marketplace issues Form 1099-K. Amazon uses this form to report your monthly and annual gross sales information, sales tax, and shipping fees. 

According to IRS regulations, Amazon sends Form 1099-K to all sellers who meet the $20,000 earnings or the 200 transaction rule.

If you’re an individual seller on Amazon, you don’t have to fill out Form 1099-K. Amazon will do it for you and send it to you and the IRS, provided you meet the threshold.

If you meet the $20,000 earnings or 200 transaction rule, the IRS already knows your Amazon business exists.

do i have to report amazon sales on my taxes

How To Access Form 1099-K On Amazon Seller Central

If you’d like to access Form 1099-K, go to sellercentral.amazon.com, click on “Reports,” and click on “Tax Document Library.” 

Finally, select the applicable “Form 1099-K.”

The $20,000 Earnings Or 200 Transaction Rule

This rule means that all Amazon sellers who make more than $20,000 of unadjusted gross sales and have more than 200 individual transactions must provide their tax information to Amazon.

Does My Tax Liability Change With A Business License?

Business owners calculate taxes by reviewing business activity and the tax rate associated with your assigned business classification. Therefore, your tax liability is more likely to change with a business license.

Which Tax Forms Should I Report If I Have A Business License?

There are five general types of business taxes that you should report if you have a business license. These taxes include:

Income Tax: This is a form of tax levied on the earnings of a business. All businesses except partnerships are required to file an annual income tax. The form you use to report income taxes depends on the type of business you operate.

do i have to report amazon sales on my taxes

Estimated Tax: Sellers make these tax payments when their income is not subject to withholding by a tax collector. Businesses must pay estimated taxes on income by making regular payments of estimated tax during the year.

Self-Employment Tax: This is a form of tax imposed on self-employed people. Self-employment consists of two parts: social security coverage and Medicare coverage.

Employment Taxes: If you have employees, you’re required to report the following taxes:

  • Social security and Medicare taxes
  • Federal income tax withholding
  • Federal unemployment (FUTA) tax

Excise Tax: This is a form of tax levied on specific goods such as alcohol, tobacco, and energy. Some of the federal excise tax forms you must report include Form 720, Form 2290, Form 730, and Form 11-C.

do i have to report amazon sales on my taxes

Do Amazon Sellers Also Pay Sales Taxes?

According to the Amazon Marketplace Facilitator Law, Amazon is responsible for calculating, collecting, and remitting sales taxes on behalf of sellers. In other words, the law shifts the collection of sales taxes from the seller to Amazon. So Amazon sellers do pay sales taxes, but Amazon remits the taxes on their behalf.

What Are State Sales Taxes?

State governments levied state sales taxes, as the name implies, when consumers purchase goods and services. These taxes are charged at the point of purchase and then transferred to the taxing authority by the collecting retailer.

State sales taxes are typically calculated as a percentage of the sale price and vary from state to state. States rely on sales taxes to fund general government spending.

If you sell on Amazon, you’ll need to collect state sales taxes on behalf of the state government and remit those taxes to the taxing authority.

do i have to report amazon sales on my taxes

What’s A Sales Tax Nexus?

A sales tax nexus is a business’s connection with a taxing jurisdiction or state. Business owners establish a nexus by having a physical presence or an economic relationship in a state. Each state in the U.S. has its own set of rules regarding what establishes a sales tax nexus.

Business activities such as owning a warehouse, having a third-party affiliate, or temporarily doing business in a state can create sales tax nexus. Besides, employing independent contractors, remote employees, or traveling representatives can create a nexus in some states.

When you have a sales tax nexus with a particular state, you’ll be required to adhere to the jurisdiction’s sales tax rules. For each state where you have a sales tax nexus, you must collect sales tax from customers and remit it to the state. 

But if there’s no sales tax nexus between the jurisdiction and your business, that state cannot impose its sales taxes on you.

How Can I Determine Whether My eCommerce Business Has A “Nexus”?

As we’ve highlighted, a sales nexus forms when a business has a physical presence or significant economic connection in a state or taxing jurisdiction.

The following factors will help you determine if your eCommerce business has a “nexus.”

  • Physical presence: Having an office, store, or home office in a state means you have a nexus with that state.
  • Economic connection: A business can establish a nexus by making significant sales in a state. You can also create a nexus by conducting physical business in a state, such as selling or showcasing items at a trade show.
  • Affiliates: Having a third-party affiliate in a state can also create a nexus.
  • Dropshipping: If you run a business model whereby a supplier ships products directly to customers from their warehouse, you also have a nexus in those warehouse locations.
  • Personnel: Having employees, salespeople, or independent contractors in a state.
  • Inventory: Owning a warehouse or storage facility in a state establishes a nexus. Also, storing inventory in an Amazon FBA warehouse or a third-party fulfillment center may create a sales tax nexus.

These factors will help you determine if your eCommerce business has a nexus in a state. If you still doubt if you have a nexus in a particular state, it’s best to contact that state’s taxing authority for more information.

Do I Need Anything Specific To File Sales Tax?

do i have to report amazon sales on my taxes

You’ll need Form 1099-K, which Amazon issues to file sales tax. If Amazon doesn’t send you the form, you can find it on your Amazon Seller Central account.

Log into your Amazon Seller Central account go to Reports > Tax Document Library > Form 1099-K.

What’s The Amazon Marketplace Facilitator Law?

A marketplace facilitator is a business that owns and operates a marketplace and allows third-party sellers to sell products there. 

Based on this definition, Amazon is a marketplace facilitator as it enables sellers to list products on their website, takes payments, and assists with shipping in some cases.

The Amazon marketplace facilitator law requires Amazon to calculate, collect and remit sales tax on behalf of their third-party sellers’ transactions. 

In states where the Amazon marketplace facilitator law applies, Amazon is responsible for collecting and remitting sales taxes to the relevant taxing authority.

As of November 2021, 46 states in the U.S. have enacted marketplace facilitator laws to transfer the responsibility of collecting and remitting sales tax to marketplaces.

do i have to report amazon sales on my taxes

Are All My Products Taxable?

It’s essential to determine if what you’re selling on Amazon is taxable to know what to expect regarding your tax obligations.

Typically, tangible products are subject to sales tax. However, sales tax rules differ with individual states, meaning a particular category of products may be taxable in one state and exempt from sales tax elsewhere.

For instance, grocery, clothing, and textbooks are not taxable in some states but are taxed differently in other states.

While most states consider groceries nontaxable or only taxable at a specific price, states like Kansas, Idaho, Hawaii, and Oklahoma tax groceries at the regular sales tax rate.

Most states consider prescription drugs nontaxable except Illinois and Georgia.

If you need accurate information about the products that are taxable or nontaxable, check with your state’s taxing authority.

Is There An Easier Way To Manage Sales Tax Collection?

The following tips will help you manage sales tax collection more effectively:

  • Stay On Top Of Your Sales Tax Obligations
  • Understand The Penalties That Come With Late Filing And Mistakes
  • Know Each State’s Filing Deadline Dates
  • Know Each State’s Requirements Regarding The Filing Of Amazon Sales Taxes
  • Obtain The Necessary Sales Tax Permits
  • Consult With A Tax Professional If You Need Help  

Do I Have To Report Amazon Sales On My Taxes Without A Form 1099-K?

If you’ve met the $20,000 or 200 transaction rule, you’re required to report your sales on your taxes whether you received a 1099-K. 

If you’ve met the criteria and haven’t received a 1099-K form by January 31, contact Amazon to determine if it has prepared one. 

Alternatively, you can report your Amazon sales on Schedule C (Form 1040).

4 Reasons eCommerce Sellers Should Pay Their Darn Taxes

Have you been avoiding your taxes? You’re not alone. It’s the doldrums of tax season. The weather is crappy, everyone is sick, and the itch to do your taxes is intense.

Even if you’re trying to avoid filing your taxes for this year, your tax bill is still due on April 15th.

Did you do any eCommerce selling this past year? If so, there are some things to consider. Trust me, though. It’ll be easier to do them now than next year when you have more income and expenses. Let’s get started!

1. It’s the law.

This might sound a little funny, but it’s true – and it’s not just a business practice we think you should do, it’s the law. Anyone who conducts taxable transactions is required to register with the IRS and must report those sales on their taxes each year.

Even if you do not have any employees and all of your work is conducted online, you still need to pay employment taxes and file a Schedule C for your eCommerce business as well as Form 1040 (if there are other sources of income included in your return).

2. Out Of State Taxes

Your state will expect you to pay your share of state income taxes, even if you don’t live there. This one might take some research, but I’m sure it will vary by state.

For example, do a quick Google search of whether or not Colorado requires non-residents to pay state income taxes. Then do the exact search for your state.

3. You’re Required To File A Separate Business Entity

You may be required to file a separate business entity in some states or counties. Like your home and car, you might need to register your eCommerce business with your local government as a separate entity (e.g., LLC). If so, then you’ll also have tax obligations from that registration.

4. Weak Excuses Like “I Didn’t Make Enough” Does Not Fly With The IRS.

The IRS is well aware of the fact that some people do not make very much money online, especially on sites like eBay and Amazon. That’s why they give the eCommerce seller a way to claim what they do earn as a “micro-business”.

A micro-business is one where total sales do not exceed $20,000 annually. This can be claimed by filing Schedule C with your tax return.

This applies only if you do not have any employees of your own or business expenses which you can deduct from your gross income. In other words, you get no deductions for home office use or vehicle expenses.

DO NOT overlook this. It’s better to do it now while you can still fix any mistakes than next year when you’ve made more money and have more expenses.

Need Help With Amazon Sales Tax Reporting? Get In Touch With an Amazon marketing Agency

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Frequently Asked Questions

Do I Have To Pay Sales Tax If I Sell On Amazon?

YES. Every Amazon seller must report their Amazon sales as income on their taxes.

Does Amazon Report Your Sales To The IRS?

YES. The IRS requires Amazon to file Form 1099-K for the U.S. Amazon sellers who meet the $20,000 earnings and 200 transaction rule.

How Do I Report Sales Tax On Amazon?

Amazon sellers can report sales tax on Amazon using Form 1099-K, which Amazon issues.

Have To Pay Sales Tax If I Sell On Amazon?

The Amazon marketplace facilitator law requires Amazon to calculate, collect and remit sales tax on behalf of their third-party sellers’ transactions.
That means sellers do not have to report to the IRS because that’s the responsibility of Amazon.

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