Why Amazon Seller Accounting is Different
Amazon accounting isn't like traditional retail or service businesses. The platform handles multiple financial responsibilities that create unique accounting challenges:
- Biweekly settlements: You receive one payment that includes sales, fees, refunds, and adjustments all lumped together
- Complex fee structure: Referral fees, FBA fees, storage fees, removal fees, long-term storage fees—each treated differently
- Reserve accounts: Amazon holds a portion of your earnings that eventually releases (creating a cash flow gap)
- 1099-K reporting: Multiple possible sources (Amazon, payment processors, advertising platforms)
- Sales tax complexity: Amazon collects in some states; you're responsible in others
- Inventory management: Must track products in Amazon fulfillment centers separately from your own warehouse
FBA vs FBM: Accounting Differences
| Accounting Area | FBA (Amazon Fulfills) | FBM (You Fulfill) |
|---|---|---|
| Fees | Fulfillment, storage, removal fees | Only referral fee (no fulfillment) |
| Inventory | Track in FBA warehouse (Amazon reports) | Track in your location; manage manually |
| Shipping | Shipping TO Amazon (COGS); Amazon ships to customer (fee) | You pay for shipping to customer (expense) |
| Returns | Amazon processes; you get reimbursement or credit | You manage returns; record refunds manually |
| Cash Flow | More complex (reserve account, higher fees) | Simpler (fewer fees, faster cash to hand) |
Amazon Settlement Reconciliation
What Happens During Settlement (Every 14 Days)
Amazon deposits money every 2 weeks, but it's NOT just your sales revenue. A single settlement includes:
- Product sales (gross, before any deductions)
- Minus: Referral fees (8-45% depending on category)
- Minus: FBA fulfillment fees ($2-12 per unit)
- Minus: Storage fees (monthly allocation)
- Plus/Minus: Refunds (customer returns)
- Plus/Minus: Chargebacks
- Plus/Minus: Promotional adjustments
- Plus/Minus: Reserve account changes
- Plus/Minus: Reimbursements (damaged/lost inventory)
- Equals: Net amount deposited to your bank account
Why This is Confusing for Accounting
The settlement period may NOT align with your monthly accounting close. Example:
- Settlement 1: Aug 20 - Sept 3 (crosses month boundary)
- Settlement 2: Sept 4 - Sept 17
- Sales from Aug 20-31 should be recorded in August
- Sales from Sept 1-3 should be recorded in September
- But the deposit receives both together
How to Reconcile (Step-by-Step)
- Download Settlement Report: Seller Central → Reports → Payments → All Statements
- Identify settlement date range: Note the "from" and "to" dates
- Split by month: Sales/fees that occurred in Aug go to Aug P&L; Sept sales to Sept P&L
- Create journal entry in QB:
- Debit: Bank account (net deposit amount)
- Debit: Referral fees expense (total ref fees)
- Debit: FBA fees expense (total FBA fees)
- Credit: Revenue (total sales)
- Credit/Debit: Returns/Refunds
- Credit/Debit: Amazon Reserve (if held)
- Verify:**Bank deposit amount = Gross Sales - All Fees ± Adjustments
Amazon Settlement Report Fields Explained
- Transaction ID: Unique identifier (reference in QB memo)
- Type: Order, Refund, FBA Fee, Referral Fee, Adjustment, etc.
- Order ID: Links to specific product sale
- SKU: Your product code
- Description: What the transaction was (Product Sale, Return, Fee)
- Quantity: Number of units (important for FBA fees)
- Marketplace: Amazon.com, Amazon.ca, etc.
- Currency: USD, CAD, EUR, GBP, etc.
- Amount: The money amount (can be positive or negative)
Recording Amazon Transactions in QuickBooks
Essential Chart of Accounts for Amazon Sellers
Income Accounts
- Amazon FBA Revenue
- Amazon FBM Revenue
- Shipping Revenue (if charging separately)
Expense Accounts - Amazon Fees
- Amazon Referral Fees (by category if multi-category)
- Amazon FBA Fulfillment Fees
- Amazon Storage Fees
- Amazon Removal Fees
- Amazon Long-Term Storage Fees
- Amazon Returns Processing
Asset Accounts
- Amazon Reserve (liability/asset)
- Inventory - Raw (products awaiting FBA shipment)
- Inventory - FBA (products in Amazon warehouse)
COGS Accounts
- COGS - Product Cost
- COGS - Inbound Freight
- COGS - Tariffs & Duties
- COGS - Packaging & Labeling
Example Journal Entry: $10,000 Amazon Settlement
Scenario: 2-week settlement totals $10,000 deposit
Breakdown:
- Product Sales: $15,000
- Referral Fees: -$1,500 (10%)
- FBA Fulfillment: -$2,000
- Storage Fees: -$500
- Reserve held: -$1,000
- Net deposit: $10,000
Journal Entry:
- Debit: Bank - Amazon Account $10,000
- Debit: Amazon Referral Fees Expense $1,500
- Debit: Amazon FBA Fees Expense $2,000
- Debit: Amazon Storage Fees Expense $500
- Debit: Amazon Reserve (Asset) $1,000
- Credit: Amazon Revenue $15,000
How it balances: $10,000 + $1,500 + $2,000 + $500 + $1,000 = $15,000 ✓
COGS & Inventory Accounting
What to Include in COGS
- ✓ Product cost from supplier (e.g., $5/unit)
- ✓ Inbound freight (ocean/air shipping to your location)
- ✓ Import tariffs & duties
- ✓ Prep costs (FNSKU labels, packaging, QC)
- ✗ Amazon FBA fees (these are operating expenses, not COGS)
- ✗ Your advertising (operating expense)
COGS Impact on Profitability
Common mistake: Confusing net revenue with profit.
- Revenue: $100 (what customer paid)
- Less Amazon Referral Fee (10%): -$10
- Less FBA Fulfillment Fee: -$3
- Revenue after fees: $87
- Less COGS ($30 product + $5 freight): -$35
- Profit: $52 (not $100!)
Inventory Valuation Method
Choose one and use consistently (most use FIFO for Amazon):
- FIFO (First-In, First-Out): First products bought are first sold (matches Amazon rotation)
- LIFO (Last-In, First-Out): Last products bought are first sold (not recommended for inventory tracking)
- Weighted Average: Average cost across all purchases
Tax Obligations & 1099-K Reporting
What is 1099-K?
A tax form that reports gross payment volume. If you meet thresholds, the payer (Amazon, payment processor) sends you a 1099-K and the IRS a copy.
Amazon 1099-K Thresholds (2025)
- Prior rule (2021): $20,000 in sales AND 200 transactions
- New rule (starting 2024): $5,000 in payment volume (under review)
- Check current IRS guidance; rules change annually
What 1099-K Includes (The Confusion)
- ✓ Gross sales (before Amazon takes any fees)
- ✗ NOT net after fees (so appears inflated)
- Example: 1099-K shows $100K, but actual net was $70K after fees
How to Report 1099-K Income on Tax Return
Don't report 1099-K amount directly. Instead:
- Report your actual net revenue from Schedule C (Profit or Loss from Business)
- Include memo to IRS explaining difference (fees reduced gross)
- Most accountants handle this; don't panic if 1099-K looks bigger than reported income
Multiple 1099-K Sources
If you sell across multiple channels:
- Amazon FBA: Amazon sends 1099-K (if threshold met)
- Amazon FBM: Stripe/Square may send 1099-K (if processing)
- Shopify: Stripe may send 1099-K
- Total all sources: IRS also receives all totals; ensure they match your tax return
Month-End Closing for Amazon Sellers
Month-End Checklist (30 minutes)
- ☐ Download all Amazon settlement reports for the month
- ☐ Record all settlements in QB (split by month if crossing boundaries)
- ☐ Reconcile bank account to QB
- ☐ Verify reserve account balance matches Amazon
- ☐ Calculate and accrue sales tax (if collecting)
- ☐ Review month's P&L for anomalies
- ☐ Close month in QB; don't modify prior months
Common Amazon Accounting Mistakes
Mistake 1: Recording settlement as one lump sale
Wrong: All $10K deposit = Sales for the month
Right: Split into sales revenue + fee expenses
Mistake 2: Not tracking reserve separately
Wrong: Assume full payout amount is available cash
Right: Track reserve as separate asset; account for gap
Mistake 3: Confusing fees vs COGS
Wrong: Including FBA fees in COGS
Right: FBA fees are operating expenses; COGS is product+freight+prep
Summary: Amazon Seller Accounting Checklist
✓ System Setup: Separate bank account, QB with Amazon chart of accounts, integrated Amazon app
✓ Daily: Track expense receipts; monitor bank deposits
✓ Weekly: Categorize transactions; spot-check revenue
✓ Biweekly: Reconcile Amazon settlement to QB; verify fees
✓ Monthly: Close books; generate P&L; review profitability
✓ Quarterly: Calculate estimated taxes; review COGS accuracy
✓ Annually: Prepare 1099-K reconciliation; file tax return