Calculating Amazon FBA Inventory by State

Did you get your business income tax returns filed yesterday? No?!

Inventory TrackingChances are, if you didn't get your returns filed by the deadline, one of the hold-ups could have been what is called "state apportionment." Especially because of the results of the South Dakota vs. Wayfair case, more and more larger (and even smaller) sellers are finding themselves filing sales tax returns in more states due to the sales tax nexus issues.

And if you're filing in more states due to sales tax nexus, you are likely also on the radar for income tax nexus and are looking to file a lot more business income tax returns in other states as well.

This article (and the related YouTube video) are intended to help out all of you Amazon sellers out there navigate the waters of "state apportionment."

Hopefully if you're in this camp, you've hired a reputable tax professional to assist you with preparing your income tax returns. But they can't do this alone. To properly prepare your returns, they're going to need a little extra information from you. But don't worry - we made it pretty darn easy on you.

What Your Tax Preparer Needs

In general, here's what your tax preparer is looking for when it comes to state apportionment: a breakdown by state for each of the following: sales, payroll, and property (including inventory). Although some of the other information may seem fairly obvious (like payroll is where are your employees working), Amazon FBA (Fulfilled by Amazon) can muddy the waters. 

Even if you send all of your inventory to just one Amazon warehouse, if you're using Amazon FBA, they have likely spread your inventory across the country rather quickly. As such, you likely don't really know where all your inventory is at the end of the year.

How You Figure This Out

You just need to download a couple of key reports, reference them against a list of Amazon's warehouses, and multiply the inventory quantities against each SKU's cost, and poof! You've got your numbers.

Here is a short YouTube video outlining the process.

 

 

And here are the step by step instructions:

  • Seller Central Reports

    • Go to Reports → Fulfillment

    • Under the Inventory header (might have to click on Show More), select Monthly Inventory History Report

    • Go to the Download tab, then select Exact Dates from the drop-down menu

    • Pull two reports:

      • Report 1 - Prior year (2017)

        • Select December 2017 to December 2017

        • Request Download

      • Report 2 - Prior year (2018)

        • Select December 2018 to December 2018

        • Request Download

    • Wait until the reports are generated, then download them

    • Paste to the Dec 2017 and Dec 2018 tabs in the template. Make sure columns J-L are populated for all lines on the spreadsheet.

  • Mapping States

    • For the amzstate v2 tab, go to the Inventory Locations section in A2X and download the list. Copy/paste into the spreadsheet. This will populate Column K on the Dec 2017 and Dec 2018 tabs.

    • Sort by Column K to see if there are any listed as N/A. If there are, continue with the next steps. If all are populated with a state code, skip to the next section below.

    • If some states aren’t populated in Column K, go to the AMZstates tab.

    • If you find a new warehouse, look it up on Google and find the code, state and address details. In Google, search on: Amazon FBA Warehouse “code”

    • Update your spreadsheet

  • Applying Costs

    • Create a list of all of your costs by SKU

    • Each report tab (Dec 2017 and Dec 2018) will "Index/Match" the costs

  • Pivot the data

    • Refresh the current pivot tables on the Pivots tab

  • Adding in Non-FBA inventory

    • Make sure to know where each current warehouse is located

    • Add it to the appropriate state

    • Total the number

If you can proactively provide this information to your tax professional, not only will they thank you, but your business returns will likely be much more accurate and create a lot less stress for you and your preparer. 

Please click below for a link to the free downloadable spreadsheet, Amazon FBA Inventory by State.

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