Amazon FBM Taxes and Accounting: What Sellers Need to Know

FBM Tax Basics

As an FBM seller, your tax situation differs from FBA. You have more control—and more responsibility.

Disclaimer: This is general information, not tax advice. Consult a tax professional for your specific situation.

Sales Tax for FBM Sellers

The Good News (Post-2019): Amazon collects and remits sales tax in most states through Marketplace Facilitator laws.

States Where Amazon Collects: All 45 states with sales tax (as of 2024)

What This Means for You:

• Amazon handles sales tax collection
• Amazon remits to states
• You may still need to file returns
• Some local taxes may still apply

Nexus and Your Obligations

What is Nexus? A connection to a state that triggers tax obligations.

Physical Nexus (Most Relevant for FBM):

• Where your home/office is
• Where your warehouse is
• Where employees work
• Where you store inventory

Economic Nexus: Most states: $100,000 in sales OR 200 transactions

FBM Nexus Consideration: If you only ship from one location, your physical nexus is simpler than FBA (which creates nexus in every state with a warehouse).

Deductible Business Expenses

Shipping-Related Deductions:

Other FBM Deductions:

Record Keeping for FBM

What to Track:

Income:

• Sales by channel
• Shipping charges collected
• Other income (refunds received, etc.)

Expenses:

• Product costs
• Shipping costs (per carrier)
• Packaging supplies
• Fees by platform
• Software subscriptions
• Equipment purchases
• Travel/mileage

Accounting Best Practices

Monthly Reconciliation:

Download Amazon settlement reports

Download Atoship shipping reports

Match to bank statements

Categorize expenses

Update P&L

Use Accounting Software:

• QuickBooks (most popular)
• Wave (free)
• Xero (good for e-commerce)
• Excel (basic, but works)

Shipping Cost Tracking

Why Detailed Tracking Matters:

Monthly Shipping Report:
Carrier Breakdown:
USPS: $1,850 (58%)
UPS: $1,120 (35%)
FedEx: $220 (7%)
Total: $3,190
Average per order: $4.75
Orders shipped: 672
By service:
USPS Priority: $1,200
USPS Ground: $650
UPS Ground: $980
UPS 2-Day: $140
FedEx: $220

Atoship provides detailed shipping reports by carrier, service, and date.

Income Tax Considerations

Self-Employment Tax: FBM income is typically self-employment income.

• 15.3% SE tax on net profit
• Deductible portion on 1040

Quarterly Estimated Taxes: If you expect to owe $1,000+ in taxes, make quarterly payments:

• Q1: April 15
• Q2: June 15
• Q3: September 15
• Q4: January 15

Business Structure:

Inventory Accounting

Methods:

• FIFO (First In, First Out) - Most common
• LIFO (Last In, First Out) - Less common
• Average Cost - Simple

Year-End Inventory: You must count inventory at year-end for COGS calculation.

Beginning Inventory: $10,000
+ Purchases: $45,000
Ending Inventory: $12,000
= COGS: $43,000

Shipping as COGS vs Expense

Two Approaches:

Include in COGS:

• Shipping is part of product delivery
• Reduces gross profit
• Common for shipped products

Separate Expense:

• Shipping as operating expense
• Shows gross profit before shipping
• Easier to analyze

Either is acceptable. Be consistent.

Working with an Accountant

When to Hire:

• Revenue exceeds $50,000
• Multiple states involved
• Complex inventory
• Considering S-Corp
• Audit concerns

What to Prepare:

• Amazon settlement reports
• Shipping reports (from Atoship)
• Bank statements
• Receipt documentation
• Inventory counts

Tax Saving Strategies

1. Max Out Deductions: Track everything—small expenses add up.

2. Retirement Accounts:

• SEP-IRA: Up to 25% of net income
• Solo 401(k): Higher limits
• Reduces taxable income

3. Equipment Purchases: Section 179 allows immediate deduction of equipment.

• Buy thermal printer → Deduct full cost
• Computer, desk, etc.

4. Timing:

• Accelerate expenses into current year
• Defer income if beneficial
• Stock up on supplies before year-end

Common FBM Tax Mistakes

❌ Not tracking shipping costs Shipping is a major expense—track every label.

❌ Missing deductions Home office, mileage, supplies—all add up.

❌ Mixing personal and business Use separate bank account and credit card.

❌ Not making estimated payments Penalties add up—pay quarterly.

❌ Poor record keeping Save receipts digitally, organize monthly.

Creating a Financial Rhythm

Daily:

• Quick bank balance check
• Note any large expenses

Weekly:

• Review orders and revenue
• Check shipping costs

Monthly:

• Full reconciliation
• Update P&L
• Review metrics

Quarterly:

• Estimated tax payment
• Performance review
• Inventory check

Annually:

• Full inventory count
• Year-end close
• Tax preparation

Atoship for Tax Reporting

What Atoship Provides:

• Detailed shipping cost reports
• Export to CSV/Excel
• Filter by date, carrier, service
• Monthly summaries
• Integration with accounting tools

Getting Your Data: Reports → Shipping Costs → Select Date Range → Export

Action Items

This Week: ☐ Set up separate business bank account (if not done) ☐ Sign up for Atoship (free, includes reporting) ☐ Choose accounting software ☐ Create expense tracking system

This Month: ☐ Review last 3 months of expenses ☐ Categorize and organize ☐ Estimate quarterly taxes owed

This Quarter: ☐ Meet with accountant ☐ Make estimated payment ☐ Review tax strategy

Stay Organized, Save Money

Good accounting practices:

• Maximize your deductions
• Avoid tax surprises
• Make better business decisions
• Sleep better at night

Start tracking your shipping costs properly with Atoship's detailed reports. Create your free account today.