FBA Experience with Income Tax and ROI
We're considering going FBA for a couple of our top selling products. We had a discussion with Avalara which we use to automate our sales taxes, and they confirmed we'll have additional filing requirements for FBA which includes income tax. We already collect sales tax in 40 states, but the problem we're facing is income tax in ~46 states. What is your experience with this?
What kind of revenue increase did your business experience after switching to FBA? What has your ROI been like after all the fees and taxes are accounted for? What is your experience with the pros and cons of FBA? What are some other things we should consider?
FBA Experience with Income Tax and ROI
We're considering going FBA for a couple of our top selling products. We had a discussion with Avalara which we use to automate our sales taxes, and they confirmed we'll have additional filing requirements for FBA which includes income tax. We already collect sales tax in 40 states, but the problem we're facing is income tax in ~46 states. What is your experience with this?
What kind of revenue increase did your business experience after switching to FBA? What has your ROI been like after all the fees and taxes are accounted for? What is your experience with the pros and cons of FBA? What are some other things we should consider?
1 Antwort
Christine_Amazon
Hello @Seller_KLidouh2prsfe
Christine here from Amazon Forums.
Thank you for your detailed question about considering FBA (Fulfillment by Amazon) for some of your top-selling products.
Let me address your questions and concerns:
Income Tax Requirements:
- The requirement to file income taxes in multiple states due to FBA is a common concern. This is often referred to as "nexus" for tax purposes. While I can't provide specific tax advice, here are some general points:
- Many states consider inventory stored in Amazon fulfillment centers as creating nexus, potentially requiring income tax filings.
- The complexity and cost of compliance can be significant.
- Some sellers use tax professionals or services specializing in e-commerce to manage these requirements.
Revenue Increase with FBA:
- The impact on revenue can vary widely depending on your products, competition, and previous fulfillment efficiency. However, many sellers report: Increased sales due to Prime eligibility
- Improved product visibility in Amazon search results
- Potential for higher conversion rates
ROI After Fees and Taxes:
- This also varies significantly based on product type, price point, and margins. Considerations include:
- FBA fees (fulfillment, storage, etc.)
- Potential for reduced shipping costs on your end
- Increased tax compliance costs
- Possible reduction in customer service and fulfillment labor on your end
Recommendations:
Start with a pilot: Try FBA with a few products to understand the impact.
Detailed cost analysis: Compare your current fulfillment costs with projected FBA costs.
Tax consultation: Consult with a tax professional experienced in e-commerce.
Inventory strategy: Develop a strategy to optimize inventory levels and avoid fees.
Monitor performance: Closely track sales, profitability, and customer feedback after switching to FBA.
Remember, while FBA can offer significant benefits, it's not a one-size-fits-all solution. Carefully weigh the pros and cons based on your specific business model and products. Many sellers use a hybrid approach, using FBA for some products and self-fulfillment for others.
Hope you have a great day!
Christine.
