Running an Amazon business is exciting. Watching sales roll in feels amazing. But tax season? That’s when many sellers feel stressed, confused, and worried about overpaying. The truth is: most Amazon sellers miss thousands of dollars in deductions every year because they don’t know what they can write off.

This guide will walk you through every legitimate deduction Amazon sellers should know. We’ll explain it in plain English, give real-world examples, and always finish with what this means for you. By the end, you’ll know exactly how to lower your tax bill — and keep more of what you earn.

How Tax Deductions Work for Amazon Sellers

When you sell on Amazon, you bring in revenue (sales). But the IRS only taxes your profit (sales minus expenses). Deductions are the legal way to subtract business costs from your income so you only pay tax on what you truly earned.

👉 What this means for you: Every dollar you deduct lowers the amount of income the IRS can tax. If you’re in the 25% tax bracket, a missed $1,000 deduction = $250 in extra taxes you didn’t need to pay.

1. Cost of Goods Sold (COGS)

This is your biggest deduction — the money you spend to get products ready for sale.

What counts:

• The price you paid your supplier or manufacturer.
• Freight or shipping to bring inventory into Amazon FBA.
• Packaging included with the product.
• Custom prep, labeling, or inserts.

👉 What this means for you: If you buy an item for $5 and sell it for $15, you don’t pay tax on the full $15. You deduct the $5 (plus shipping/packaging). If you miss this, you’ll overstate your profit — and overpay taxes.

2. Amazon Fees

Amazon takes a cut at every step. The IRS allows you to deduct all of them.

What counts:

• Referral fees (Amazon’s % cut of each sale).
• FBA fulfillment fees (pick, pack, and ship).
• Storage fees at Amazon warehouses.
• Monthly Pro Seller subscription fee ($39.99).

👉 What this means for you: These fees usually get pulled out before Amazon pays you. If you don’t track them, you’ll think you made more than you did — and the IRS will happily tax you on money you never saw.

3. Shipping & Packaging Supplies

Even if Amazon ships orders, you pay to prep and send inventory in. Don’t forget these smaller costs.

What counts:

• Boxes, tape, poly mailers, bubble wrap.
• Labels and printer ink.
• UPS/FedEx/USPS bills for shipments to Amazon.

👉 What this means for you: Small costs add up fast. $30/month in tape and labels = $360/year. Add UPS bills, and you could be missing thousands in write-offs.

4. Software & Tools

Your Amazon business likely runs on software — and it’s deductible.

What counts:

• Accounting software (QuickBooks, Xero).
• Amazon-specific financial tools (A2X, InventoryLab, SellerBoard).
• Research tools (SmartScout, Keepa, Helium10).

👉 What this means for you: If you’re paying $100/month for tools, that’s $1,200/year off your taxable profit. The IRS considers these ordinary and necessary business expenses.

5. Professional Services

Any professional help you pay for counts as a deduction.

What counts:

• Accountants, tax preparers, bookkeepers.
• Lawyers (contracts, trademarks, disputes).
• Consultants, coaches, or mentors.
• Virtual assistants.
• Product photographers or designers.

👉 What this means for you: Don’t be afraid to hire help. The cost reduces your taxable income, and in many cases, the expertise saves you more than you spend.

6. Advertising & Marketing

Money spent to get sales is deductible.

What counts:

• Amazon PPC.
• Facebook, Instagram, Google Ads.
• SEO services.
• Content creation, influencer partnerships.

👉 What this means for you: Ads eat into profit already. Deducting them means you don’t pay extra tax on money that already left your pocket.

7. Home Office Deduction

If you run your Amazon business from home, you can deduct part of your living space.

Two methods:

• Simplified: $5 per sq ft, up to 300 sq ft.
• Actual expense: A percentage of rent, utilities, insurance, based on your office size.

👉 What this means for you: Even a 100 sq ft room = $500 deduction under the simplified method. If you use the actual method, savings could be even higher.

Bonus Deductions Most Sellers Miss

Travel & Trade Shows

Flights, hotels, rental cars, meals (50%), and conference tickets for business trips all count. Yes — visiting ASD or Canton Fair is deductible.
👉 If you’re traveling to find suppliers or meet partners, keep every receipt.

Education & Training

Courses, coaching, and books about selling are deductible.
👉 Learning how to run your Amazon business better literally pays for itself.

Office Supplies & Equipment

Pens, paper, laptops, printers, and even a second monitor.
👉 If you use it for your Amazon business, it’s deductible.

Phone & Internet

Deduct the business portion of your bill.
👉 If 50% of your phone usage is for Amazon, you deduct 50% of the bill.

FAQs: Common Seller Questions

Q: Can I deduct inventory I haven’t sold yet?
A: If you’re using accrual basis accounting, you can’t deduct it until it sells until it sells — inventory becomes COGS once it leaves your shelf.

If you’re using cash accounting, it is accounted for at the time of purchase.

Q: Can I deduct mileage if I drive to UPS?
A: Yes. Track business miles — the IRS allows a per-mile deduction.

Q: What if I use my phone for both personal and business?
A: Deduct the percentage used for business. Example: 60% business use = 60% of your bill deductible.

Q: Can I deduct meals?
A: Yes, but only 50% when tied to business travel, trade shows, or meetings.

Common Mistakes Sellers Make

Even experienced Amazon sellers slip up when it comes to taxes. Most of the time, it isn’t because they’re careless — it’s because they don’t know what to track or they underestimate how much small things add up. The IRS won’t cut you slack just because you didn’t know, and mistakes can quickly snowball into overpaying taxes or getting flagged in an audit. Here are the traps we see sellers fall into most often:

• Forgetting to deduct Amazon fees (big one).
• Not tracking shipping supplies.
• Mixing personal and business expenses.
• Having no system for receipts or reconciliation.

👉 What this means for you: Missing just a few deductions can cost you thousands each year. Having messy books means you’ll never really know your true profit — or you’ll overpay the IRS.

How to Track Deductions Without Losing Your Mind

Trying to track deductions with messy spreadsheets or by hand can feel overwhelming. The good news is there are tools built for Amazon sellers that automate most of the work. We’re tool-agnostic — meaning you don’t have to use the exact ones we recommend — but here’s what each type of tool does and why it matters. Choose the one that fits your workflow and budget.

• Accounting Software (QuickBooks, Xero
  

Purpose: Tracks income, expenses, and produces financial reports like profit & loss or balance sheets.
Why it matters: This is the backbone of your bookkeeping — it shows your true profit after deductions.

• Sync Tools (A2X, Link My Books
  

Purpose: Pulls detailed Amazon transaction data into your accounting software automatically.
Why it matters: Amazon payouts are messy. A2X breaks them down into sales, fees, and COGS so your books are accurate without manual entry.

• Research & Reporting Tools (SellerBoard, InventoryLab
  

Purpose: Helps you analyze products, fees, and performance at the SKU level.
Why it matters: These tools give you clarity on which products are actually profitable and where you’re leaking money. That makes your deductions more accurate and helps you grow smarter.

• Receipt Capture & Storage (Hubdoc, Dext, or even Google Drive/Dropbox)

Purpose: Digitally stores receipts and connects them to your bookkeeping software.
Why it matters: If you’re ever audited, receipts prove your deductions. Digital storage keeps everything organized and safe.

• Hire a Pro
  Purpose: A bookkeeper or accountant keeps everything clean, reconciled, and audit-ready.

This can feel overwhelming, especially if you’re just starting out. Setting it up correctly from day one saves you countless headaches and often thousands in taxes. That’s where we come in: we offer a setup service to connect your accounting tools the right way, and if you want ongoing support, we can handle that too. Best part? Our fee is deductible — instead of you missing deductions and paying their fee (the IRS).

👉 What this means for you: Clean financials don’t just lower your taxes. They make you look credible to brands, banks, and partners. If you want to grow, this is the foundation.

Final Word

Imagine it’s tax season next year. Instead of scrambling through Amazon reports or hunting for receipts, you sit down with everything organized. Your costs, fees, and expenses are already tracked. Your deductions are clear. All you have to do is hand it to your accountant — or file with confidence — knowing you’re not leaving money on the table.

That’s the power of setting things up right now. You’re not just lowering your tax bill. You’re buying peace of mind, clarity, and the ability to focus on growing instead of cleaning up.

With the right tracking, you’ll:

• Lower your tax bill.
• See your true profit.
• Build a business that brands and banks take seriously.

👉 Bottom line: Every Amazon seller should track COGS, fees, shipping, tools, ads, and even part of their home office. These deductions lower your taxes and protect your profit.

“Knowing your deductions is step one. But do you know if you’re set up to actually save the most in taxes? Inside the checklist, we’ll also show you the #1 next step every 7-figure seller should take to legally cut their tax bill even further.”