Amazon FBA Sellers, CPA & Tax Services

Why Amazon FBA Sellers in Dallas Need a CPA Who Understands E-Commerce

Amazon FBA selling creates tax obligations that most CPAs have never dealt with. Your inventory sits in Amazon warehouses across a dozen or more states, your Seller Central reports categorize dozens of fee types that need proper classification, and your cost of goods sold has to be tracked at the SKU level to be accurate. A general-practice accountant who handles dentists and law firms will miss deductions, misclassify income, and leave you exposed to sales tax liability in states you have never set foot in.

At AG Freideman, we work with Amazon FBA sellers in Dallas, Plano, Frisco, and across the DFW area who need a CPA that actually understands how FBA accounting works. Al Freideman has over 30 years of tax and accounting experience, handles every client personally, and stays current on the marketplace tax rules that change constantly. When you call our office, Al answers. When your return is filed, Al reviewed it.

How Does FBA Inventory Create Nexus in Other States?

When Amazon stores your inventory in its fulfillment centers, you may establish physical nexus for tax purposes in every state where that inventory sits. This means you could have filing obligations in states like California, Texas, New York, Pennsylvania, New Jersey, and others, even though you operate your business entirely from Dallas.

For income tax purposes, states with nexus can require you to file a state income tax return and apportion a share of your profits to that state. Texas has no state income tax, which is one advantage of being based here. But if Amazon ships your inventory to a warehouse in Georgia or Illinois, those states may require a filing. The rules vary by state: some use factor-presence thresholds (typically $500,000 or more in sales), while others assert nexus based solely on the physical presence of stored inventory.

We review your Amazon Inventory Event Detail reports and FBA Fulfillment reports to identify exactly which states hold your inventory. Then we determine your actual filing obligations state by state, so you are not blindsided by a notice from a state you did not even know you owed money to.

How Should Amazon Fees Be Categorized on Your Tax Return?

Amazon charges FBA sellers dozens of distinct fees, and each one needs to be classified correctly for tax purposes. Lumping everything into a single “Amazon fees” expense line is a common mistake that can distort your profit margins and raise red flags with the IRS.

• Referral fees are essentially commissions and should be categorized as selling expenses or commissions paid.
• FBA fulfillment fees (pick, pack, ship) are shipping and handling costs that belong under cost of goods sold or fulfillment expenses, depending on your accounting method.
• Monthly storage fees and long-term storage fees are warehousing costs, properly classified as inventory storage expenses.
• Advertising fees (Sponsored Products, Sponsored Brands) are marketing expenses and fully deductible in the year paid.
• Subscription fees (the $39.99/month Professional Seller account) are a deductible business expense.
• Removal and disposal fees factor into your inventory cost basis or can be written off as losses depending on the situation.

We reconcile your Amazon settlement reports against your bank deposits every month, categorize each fee type properly, and make sure nothing falls through the cracks. This level of detail is what separates professional FBA bookkeeping from guesswork.

Are Amazon Reimbursements Taxable Income?

Yes. When Amazon reimburses you for lost or damaged inventory, that reimbursement is income that must be reported on your tax return. Many FBA sellers either miss these entirely or fail to offset them against the cost basis of the inventory that was lost.

The proper treatment depends on the type of reimbursement. If Amazon lost your inventory in a warehouse, the reimbursement typically offsets your inventory cost (reducing your COGS deduction). If you receive a customer-return reimbursement where the item was not actually returned, that is ordinary income. Amazon’s reimbursement reports are notoriously difficult to reconcile, and the amounts do not always match what you are owed. We track reimbursements against your inventory records so each one is reported correctly and you are not paying tax on money you did not actually receive.

Why COGS Tracking by SKU Matters for FBA Sellers

The IRS requires businesses that sell physical products to calculate cost of goods sold accurately. For Amazon FBA sellers, that means tracking your landed cost for every SKU: the product cost, shipping to Amazon’s warehouse, customs duties (if importing), prep and labeling fees, and any other costs incurred to get inventory into a sellable condition.

If you sell 15 different products with different margins, a single blended COGS number will either overstate or understate your actual profit. SKU-level tracking ensures your tax return reflects reality. It also helps you identify which products are actually profitable after all costs are accounted for, which is valuable business intelligence beyond just tax compliance.

We set up inventory tracking systems (typically in QuickBooks) that capture your true landed cost per unit, reconcile against Amazon’s inventory reports, and produce an accurate COGS figure at tax time. For sellers sourcing products from overseas, we also make sure customs duties and freight costs are properly capitalized into inventory rather than expensed immediately.

Sales Tax and Marketplace Facilitator Rules in Texas

Texas requires marketplace facilitators like Amazon to collect and remit sales tax on behalf of third-party sellers for sales delivered to Texas customers. The Texas state sales tax rate is 6.25%, with local jurisdictions adding up to 2% for a combined maximum of 8.25%. Because Amazon handles this collection and remittance as the marketplace facilitator, most FBA sellers do not need to separately collect Texas sales tax on their Amazon sales.

However, if you also sell through your own Shopify store, at trade shows, or through any channel outside of a qualifying marketplace facilitator, you are responsible for collecting and remitting sales tax yourself. You will need a Texas Sales and Use Tax Permit from the Comptroller’s office, and you must file returns on the schedule they assign (monthly, quarterly, or annually based on your volume). We handle sales tax registration, filing, and compliance for FBA sellers who sell through multiple channels.

Common Amazon FBA Tax Mistakes We Fix

After working with e-commerce sellers, we see the same costly errors repeatedly. Here are the most common ones:

• Treating all Amazon deposits as revenue. Your bank deposit from Amazon is net of fees, refunds, and reimbursements. Gross revenue is a different (higher) number. Using deposits as your revenue figure understates your income and your deductions simultaneously, creating an inaccurate return.
• Ignoring inventory on hand at year-end. You cannot deduct the cost of unsold inventory. Products sitting in Amazon’s warehouses on December 31 are an asset, not an expense. Failing to account for ending inventory inflates your COGS deduction and can trigger an audit.
• Missing the home office deduction. Many Dallas-area FBA sellers run their business from a home office, prep area, or garage. The IRS allows a deduction for the business-use portion of your home, but it must be calculated correctly using either the simplified method ($5 per square foot, up to 300 square feet) or the regular method based on actual expenses.
• Not making quarterly estimated tax payments. FBA sellers are self-employed, and the IRS expects quarterly estimated payments (due April 15, June 15, September 15, and January 15). Underpaying can result in penalties, even if you pay your full balance by the filing deadline.
• Failing to elect S-Corp status when it would save money. FBA sellers earning consistent profits above roughly $50,000 to $60,000 per year may save significantly on self-employment tax (15.3%) by electing S-Corp status and paying themselves a reasonable salary. We run the numbers for every client to determine whether an S-Corp election makes sense for their specific situation.

If any of these sound familiar, we can review your prior returns and correct the issues going forward. Call Al Freideman directly at (972) 893-3481 to schedule a free consultation.

What Does It Cost to Hire a CPA for Your Amazon FBA Business?

We publish our pricing because we believe in transparency. For most FBA sellers operating as sole proprietors, business tax preparation (Schedule C) runs $750 to $1,200. Sellers structured as an S-Corp or partnership can expect $1,000 to $2,000 for their business return (Form 1120S or 1065 with K-1 preparation). Monthly bookkeeping with bank reconciliation and payroll processing is $300 to $600 per month, depending on transaction volume. If you need to form a Texas LLC, that is $350 plus the $300 state filing fee to the Secretary of State. Registered agent services are $149 per year, but we include that free with any tax or bookkeeping engagement.