Bookkeeping for Amazon sellers

Steps taken and analysis: - Performed a focused web search for authoritative and practical guidance on bookkeeping for Amazon sellers in the U.S., prioritizing IRS, state revenue pages, Amazon Seller Central, e-commerce accounting vendors, and specialist accounting firms.

Search targeted bookkeeping workflows, inventory & COGS, Amazon settlement reconciliation, marketplace facilitator laws (state-by-state), 1099-K reporting, sales tax nexus, accounting software and integrations (QuickBooks, Xero, A2X, Taxomate), and recordkeeping/retention requirements.

Key findings (summary of relevant information needed to write the blog + newsletter): 1) Core bookkeeping essentials for Amazon sellers - Separate business and personal finances (dedicated bank account and card).

Use an entity (LLC) bank account and clear bookkeeping separation. - Use cloud accounting software (QuickBooks Online or Xero) linked to Amazon via connectors (A2X, Taxomate) to automate settlement mapping and reduce manual errors. - Record Amazon settlements using Amazon Settlement Reports (not just bank deposits) to capture gross sales, refunds, shipping, sales tax, FBA fees, referral fees, advertising, and other adjustments. - Reconcile monthly: settlements to accounting system and bank deposits; reconcile inventory and COGS to ensure accurate gross margin reporting. - Prefer accrual accounting for matching revenue, COGS, and inventory timing; cash-basis is simpler but less precise for inventory-heavy businesses.

Steps taken and analysis: - Performed a focused web search for authoritative and practical guidance on bookkeeping for Amazon sellers in the U.S., prioritizing IRS, state revenue pages, Amazon Seller Central, e-commerce accounting vendors, and specialist accounting firms.

Search targeted bookkeeping workflows, inventory & COGS, Amazon settlement reconciliation, marketplace facilitator laws (state-by-state), 1099-K reporting, sales tax nexus, accounting software and integrations (QuickBooks, Xero, A2X, Taxomate), and recordkeeping/retention requirements.

Key findings (summary of relevant information needed to write the blog + newsletter): 1) Core bookkeeping essentials for Amazon sellers

- Use cloud accounting software (QuickBooks Online or Xero) linked to Amazon via connectors (A2X, Taxomate) to automate settlement mapping and reduce manual errors.

• Separate business and personal finances (dedicated bank account and card). Use an entity (LLC) bank account and clear bookkeeping separation.
• Record Amazon settlements using Amazon Settlement Reports (not just bank deposits) to capture gross sales, refunds, shipping, sales tax, FBA fees, referral fees, advertising, and other adjustments.
• Reconcile monthly: settlements to accounting system and bank deposits; reconcile inventory and COGS to ensure accurate gross margin reporting.
• Prefer accrual accounting for matching revenue, COGS, and inventory timing; cash-basis is simpler but less precise for inventory-heavy businesses.

Inventory accounting & COGS - Track purchases, inbound freight, customs, duties and FBA prep costs as part of inventory cost; calculate COGS when inventory is sold. - Common methods

FIFO (most common), LIFO (less common; tax implications), specific identification for high-value items. Choose method and apply consistently. - FBA-specific considerations: transfers of inventory into FBA warehouses are recorded as inventory transfers (no immediate revenue); storage and removal fees are operating expenses.

How to record typical Amazon transactions (high-level journal-entry examples) - Record a sale (gross) and Amazon's settlement

* Debit Undeposited Funds (or Bank) for net deposit amount * Debit Amazon Fee Expense (for total fees) and Sales Tax Payable if tax collected * Credit Sales Revenue for gross sales * Credit Sales Tax Payable for tax portion (if marketplace did not collect) - Record refunds: * Debit Sales Returns & Allowances (or reduce Sales Revenue) and credit Accounts Receivable/Bank * Adjust COGS and Inventory if goods are returned to stock - Record inventory purchase: * Debit Inventory, Credit Accounts Payable/Cash - Record COGS when item sells: * Debit COGS, Credit Inventory - Record FBA storage fees, removal fees, multi-channel fulfillment charges as operating expenses.

Sales tax & marketplace facilitator rules (state-level implications) - Amazon is a marketplace facilitator in most US states and collects/remits sales tax for marketplace transactions in those states, but seller obligations remain in specific scenarios

* You must track and register for sales tax for off-Amazon channels (your website, other marketplaces) and for operations that create nexus (economic thresholds, inventory stored in state via FBA, physical presence). * Some states require sellers to register even if marketplace collects tax; keep a list of states where you have registration or filing obligations. * Economic and physical nexus thresholds differ by state—monitor sales/transaction volumes across channels.

Federal & income tax reporting - Net profit from Amazon operations is taxable per business entity type (Schedule C for sole proprietors/single-member LLCs, corporate filings for corporations). Self-employment tax applies unless structured as S-Corp with wage + distributions. - 1099 reporting

recent policy updates have lowered some thresholds; sellers commonly receive Form 1099-K from Amazon when thresholds are met—confirm current threshold with IRS guidance and Amazon Seller Central (some sources reference a $600 threshold in recent years; verify current year rules). - Estimated quarterly taxes (Form 1040-ES) are necessary if you expect to owe $1,000+ federal tax for the year. 6) Record retention and audit preparedness - Retain sales reports, settlement reports, purchase invoices, shipping documents, cost records, and bank statements. IRS guidance generally recommends at least 3 years, and up to 6 years in some cases. - Keep digital backups and organized folders for easy retrieval; reconcile monthly to avoid surprises at tax time. 7) Recommended software & integrations - Accounting: QuickBooks Online, Xero - Amazon connectors: A2X (for mapping settlements into accounting software), Taxomate - Sales tax automation: TaxJar, Avalara for multi-state filings if you have filing obligations beyond Amazon-collected tax - Use inventory management or ERP for high-volume sellers to maintain accurate stock and lot-level costing

Compliance checklist for US LLC owners / small business owners - Entity formation and state registrations (LLC filings) - Obtain EIN and set up business bank account - Set up accounting software + Amazon integration - Determine inventory accounting method and apply consistently - Monitor nexus and register for sales tax as required; track marketplace vs own-channel sales - Track and reserve funds for estimated federal and state income tax liabilities - Maintain records for at least IRS-recommended retention windows

Practical workflow & monthly closing process (recommended) - Import/automate Amazon settlement data into accounting system via A2X/Taxomate - Reconcile settlements to bank deposits and undeposited funds - Post inventory purchases and perform monthly COGS calculation - Reconcile Amazon fees and advertising to expense categories - Run P&L and Balance Sheet; review cash flow and tax reserves - If multichannel, allocate sales and tax where marketplace did not collect tax Authoritative sources & resources located (for citation in blog/newsletter)

- A2X Accounting: Amazon accounting & bookkeeping guide — practical guidance on using Amazon reports, reconciling settlements, and recommended integrations. - E2E/Corient/ProfitJets (ecommerce accounting firms): Practical tax obligations for Amazon sellers including income tax, sales tax, estimated taxes, and recordkeeping best practices. Contains clear action steps and FAQs for sellers. - LedgerGurus: Focuses on sales tax after South Dakota v. Wayfair, marketplace facilitator coverage, and practical bookkeeping tips for Amazon sellers (software recommendations, reconciliation practices). - NovaData (industry guide): Detailed overview of federal obligations, marketplace facilitator rules, and recommended compliance checkpoints. - OBG Outsourcing / FullyAccountable: Service provider perspectives describing common problems (fee tracking, inventory, multichannel) and recommended outsourced solutions. Conclusion & next steps to produce the requested deliverables: - I have collected and compressed high-quality source material and extracted the practical guidance and compliance checkpoints needed to write a comprehensive US-focused blog post and newsletter. - Next: I can draft the full blog post (detailed sections: intro, why bookkeeping matters, step-by-step bookkeeping workflow, chart of accounts template, sample journal entries, state-specific sales tax summary and how marketplace facilitator laws affect sellers, 1099/IRS reporting notes, recommended software/integration checklist, monthly close checklist, and compliance resources). I can also produce a newsletter draft from the blog content. If you want me to proceed, I will draft the blog post and newsletter content now and include state-by-state references where relevant (I will pull specific Department of Revenue links and short notes per state on registration/nexus if you want granular state entries).