Understanding Your U.S. Tax Obligations

As an international Amazon seller with a U.S. business entity, you have specific tax obligations to the IRS. Understanding these requirements is essential for staying compliant and avoiding penalties.

Federal Income Tax

How Amazon Income Is Taxed

Your Amazon income is taxed on your net profit, not gross sales. Net profit equals:

Gross Sales minus Cost of Goods Sold minus Business Expenses

Tax Rates

**LLC (disregarded entity)**: Taxed at individual rates (10%-37%)

**S-Corporation**: Pass-through taxation with potential savings

**C-Corporation**: 21% federal corporate tax rate

Form 1040-NR (Non-Resident)

If you are a non-resident alien with U.S. business income, you typically file Form 1040-NR. Key considerations:

Effectively Connected Income (ECI) is taxed at graduated rates

Fixed, Determinable, Annual, Periodical (FDAP) income has different rules

Tax treaty benefits may apply depending on your country

Sales Tax

Do International Sellers Need to Collect Sales Tax?

Yes, if you have nexus in a state. Nexus can be created by:

Storing inventory in Amazon FBA warehouses

Exceeding sales thresholds (typically $100,000 or 200 transactions)

Having economic nexus in a state

Amazon's Role

Amazon collects and remits sales tax in most states for marketplace facilitators. However, you may still have filing obligations.

States to Watch

California

Texas

Florida

New York

Illinois

1099-K Reporting

Amazon issues Form 1099-K when you exceed:

$20,000 in gross sales AND

200 transactions

Note: New IRS thresholds may lower these limits.

Deductible Expenses for Amazon Sellers

Cost of Goods Sold (COGS)

Product purchases

Shipping to Amazon FBA

Packaging materials

Import duties

Amazon Fees

Referral fees

FBA fulfillment fees

Storage fees

Advertising (PPC) costs

Operating Expenses

Software subscriptions (Helium 10, Jungle Scout, etc.)

Photography and listing optimization

Professional services (accounting, legal)

Home office expenses

Travel for business purposes

Often Overlooked Deductions

Bad debt (unrecoverable customer refunds)

Education and training

Business insurance

Bank fees

Depreciation on equipment

Estimated Tax Payments

If you expect to owe $1,000 or more in taxes, you must make quarterly estimated payments:

| Quarter | Period | Due Date |

|---------|--------|----------|

| Q1 | Jan-Mar | April 15 |

| Q2 | Apr-May | June 15 |

| Q3 | Jun-Aug | September 15 |

| Q4 | Sep-Dec | January 15 |

Tax Planning Strategies

Entity Optimization

Consider S-Corp election if your net profit exceeds $40,000-50,000 annually. This can reduce self-employment tax.

Inventory Timing

Strategic year-end inventory purchases can affect your taxable income.

Retirement Contributions

If structured properly, you may be able to contribute to U.S. retirement accounts.

Recordkeeping Essentials

Separate business bank account

Track all income and expenses monthly

Retain receipts and invoices

Reconcile Amazon settlement statements

Document business mileage

Common Tax Mistakes

**Not reporting all income** (Amazon reports to IRS via 1099-K)

**Missing deductions** due to poor recordkeeping

**Ignoring sales tax obligations**

**Not making estimated payments**

**Mixing personal and business expenses**

Working With a Tax Professional

A tax professional who understands e-commerce can:

Ensure compliance with complex rules

Identify deductions you might miss

Help with entity optimization

Represent you in IRS matters

Provide peace of mind

At Best Tax And Accounting Solutions, we specialize in Amazon seller taxes for international entrepreneurs.

The Complete Tax Guide for International Amazon Sellers