Schedule C for Amazon sellers: what actually goes where

If you sell on Amazon as a sole proprietor or single-member LLC, your business income and expenses get reported on Schedule C (Form 1040), Profit or Loss From Business — not on a separate business return. That single form is where a year of Amazon settlements, fees, and inventory purchases has to turn into a small number of IRS-defined line items.

The mechanics of Schedule C aren’t Amazon-specific, but Amazon sellers hit a few of its lines in ways a typical small business doesn’t. Here’s what actually lands where.

Part I: Income

Line 1 — Gross receipts. This is your total sales, and it should NOT be the number on your 1099-K. The 1099-K reports gross unadjusted payment volume; Line 1 is your actual gross receipts figure once you’ve applied your own accounting method consistently. (If you’ve ever tried to reconcile the two, you already know why they don’t match.) Shipping and gift-wrap amounts customers paid you are income too, and belong here alongside product sales.

Line 2 — Returns and allowances. Customer refunds and any seller-funded promotional discounts reduce gross receipts here, not somewhere in your expenses.

Line 3 — Net receipts. Line 1 minus Line 2. This is the top-line revenue figure the rest of the form works from.

Part II — Cost of goods sold, and the line sellers skip

Schedule C’s own Line 6 (other income) and the Part III cost-of-goods-sold section is where most Amazon sellers under-report, because it requires actual inventory accounting — beginning inventory, purchases during the year, ending inventory — not just “what I spent on stock.”

Line 36 — Purchases. What you paid for inventory during the year.

Line 41/35 — Beginning and ending inventory. The value of unsold stock at the start and end of the year. This is the step that turns “cash spent on inventory” into “cost of the inventory you actually sold” — skip it and your cost of goods sold is wrong even if every purchase was recorded correctly.

Line 39 — Other costs. This is where a meaningful chunk of Amazon-specific costs live: inbound freight, and other costs directly tied to acquiring and landing inventory that aren’t captured elsewhere in the COGS section. It’s easy to either miss these entirely or lump them into Part V expenses instead, which changes which section of the form carries them — the total profit comes out the same either way, but a preparer (or an IRS notice) expects to find them in a consistent place year over year.

Part V — Where Amazon’s fees actually belong

This is the section that trips up sellers who’ve never done inventory accounting before. Amazon’s fee structure doesn’t map onto Schedule C’s categories by name, so each fee type needs a deliberate landing spot:

• Commissions and fees (Line 10): Amazon’s referral/selling fee and FBA fulfilment fee — the fees charged per order.
• Other expenses (Part V): storage fees, advertising/PPC spend, subscription/software costs, and the long tail of smaller marketplace fees that don’t fit a named line elsewhere on the form.

None of these are optional to categorize correctly — a preparer who lumps “all Amazon fees” into one bucket is making a filing decision, even if nobody frames it that way.

Why this is harder than it should be

The information to fill out Schedule C correctly exists — it’s scattered across a year of Amazon settlement reports, your own purchase records, and whatever bookkeeping you’ve kept along the way. The work is pulling all of it together, mapping fee types to the right line, and doing the inventory math that Line 35/36/41 requires. Done by hand from raw reports, that’s a multi-day project every filing season, and it’s easy to get the mapping subtly wrong in a way that doesn’t surface until a preparer — or the IRS — asks a question.

Where SellerTally fits

Because SellerTally’s bookkeeping is already built around the same purchases-in, sales-out, fees-and-expenses structure a Schedule C requires, its Schedule C report maps a year of Amazon activity directly onto the form’s own lines — gross receipts, returns and allowances, cost of goods sold with the inventory roll-forward already done, and every expense category on Part V — as a single screen you (or your tax preparer) can hand off. It’s a worksheet built for your tax preparer’s actual questions, not a generic export you still have to re-sort by hand.

This isn’t tax advice, and your own preparer has the final word on what gets filed — but it means the mapping work is already done before the conversation starts.