Are you an Amazon professional seller? Maybe you got rid of a few personal belongings last year? You may be wondering if you need to declare those earnings to the IRS this tax season in either case. We help you with your Amazon FBA sales tax by answering your queries. Here are some pointers to make sure your papers are in order and that you have all of your qualifying deductibles in place.
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- Your best friend is in the 1099-K form.
The 1099-K is a sales reporting form that reports your gross sales to the IRS monthly and annual basis. Sales tax and shipping fees are examples of this. Individual online sellers are not responsible for completing a 1099-K; the seller’s accountant will complete the document. If you hold a business license, you must file a Schedule C.
In general, becoming an Amazon seller does not necessitate acquiring a business license. Some states, however, will compel you to obtain one. The requirements for obtaining a business license vary per state, but you’ll almost certainly need one if you have workers, inventories, or offices in several states. If you’re only running a one-person enterprise out of your house, on the other hand, you generally won’t need one. To avoid making a mistake, double-check your state’s criteria.
- Keep track of sales taxes.
The sales tax, especially if you’re an FBA (Fulfillment by Amazon) seller who uses Amazon’s fulfillment centers in different states, is perhaps the most stressful aspect of filing taxes as an Amazon seller. Various forms have different definitions of what constitutes a sales tax nexus, but most describe it as a location where your company has a physical presence. You have a sales tax nexus in New York and Kentucky if your home office is in New York and your inventory is in Kentucky. If your office is in California, but an employee is in Michigan, you must collect sales tax in both states.
- Remember to factor in your deductibles.
The greatest was reserved for last. Like any other self-employed person, Amazon sellers can claim deductions for items like home office expenditures and schooling fees. Any receipts connected to your online activities should never be thrown away.
- You could have nexus in new places depending on where, what, and how much you sell.
Nexus is your relationship with a state, whether it is based on geographic proximity or some other criteria, such as the number of transactions or revenue you generate in that state. This is referred to as the economic nexus.
- Reach to people
The most important thing to realize is that because you’re selling on Amazon, you’re now reaching people all over the country — which means you might have a nexus in every state. To find out, look up state rules and regulations or consult with a tax specialist who can give you competent assistance.