Selling on Amazon, yeah…everyone wants it! However, there’s always something unexpected, right?
We get it, you started your business on Amazon thinking that there are no taxes here and now you’re panicking because there are actually things you need to pay for! This is a common issue among Amazon sellers because Amazon doesn’t talk about taxes and the “unpleasant” things while attracting sellers, obviously! If you too fell into this trap, and want to understand everything before it’s too late, continue reading!
So, if you’re also one of those people who desperately need to have some information about Amazon and taxation, you’re in the right place!
Let’s talk a bit about dates. As you may already know, businesses need to pay their taxes by March 15, 2021. This means that you have to organize all the paperwork you have on your table, do your calculations and be prepared to pay by the above-mentioned date!
When it comes to taxes on Amazon, the first thing that you should think of is the all-famous form 1099-K. To better understand what this form is, why you need it and how it works, let’s see what Amazon tells about it:
“Due to Internal Revenue Service (IRS) regulations, U.S. third-party settlement organizations and payment processors, including Amazon, are required to file Form 1099-K.” This means that the world’s most famous platform legitimately operates its company and meets the requirements of the Internal Revenue Service.
As you can already understand, Amazon is required to file this form, but here’s the question, for whom? Amazon files it for U.S. taxpayer sellers who meet the following thresholds in a calendar year:
- More than $20,000 in unadjusted gross sales, and
- More than 200 transactions.
P.S. Both requirements are obligatory. If you don’t meet these two thresholds, you will not receive a Form 1099-K.
What is Unadjusted Gross Sales?
These are the total sales that a seller gets which includes sales unadjusted for fees or refunds. In other words, it is the amount Amazon customers pay for a product. Remember, even in case of refunds, Amazon doesn’t count that!
How to See This Form
In general, Amazon sellers know about this form even before they actually want to know about it! This happens through email, when Amazon decides to send a message to active Amazon sellers, and inform them that meet all the qualifications of the form, and that they need to use it.
However, some sellers, despite meeting all the above-mentioned requirements, don’t get that email from the platform. If you are one of those sellers, here’s what you can do: go to your seller account and choose reports menu. There Amazon has a special place where all the tax-related documents are saved, which is called the Tax Document library. There you will easily find the form for the year, just save it to your computer!
USD or Local Currency?
This question is one of the most common ones among Amazon sellers. The thing is, not every seller lives and operates a business from the United States. You know that Amazon has “branches” in other countries as well! This is why “all non-US regions (EU, JP, etc.) have their Form 1099-K reported in USD.” This is what Amazon says about this: “your Seller Central date range reports provide transactional amounts in local currency. For generating Form 1099-K Amazon uses a daily exchange rate that is applied on the date the transaction is booked.”
According to Amazon, “certain states have a lower reporting threshold compared to the federal levels.” What’s more, this online giant says that consulting with the IRS or other tax professional advisers is the best idea, especially when you want to understand if your state qualifies or not
If you want to understand how Amazon taxation works, feel free to contact us! Our tax professionals will guide you through the entire process, and what’s more, they will show you all the tax secrets and tricks that will help you operate your business, such as Amazon tax exemption, how to become an Amazon tax exempt seller, and all the things that are related to selling on Amazon and Amazon FBA sales tax system!