Seasonal Amazon Sellers: Master Your Inventory!

Seasonal Amazon Sellers

Seasonal products—holiday décor, summer gear, back-to-school supplies—can drive huge spikes in revenue on Amazon. But without precise inventory management and tax treatment, you risk stockouts, bloated carrying costs, and messy year-end filings. This guide shows you how to track seasonal inventory, capitalize costs correctly, and maximize deductions in 2025.

Tax Code References

• Inventory Valuation (IRC §§ 471 & 263A): Direct (purchase cost, freight-in) and allocable indirect costs (storage, prep fees) must be capitalized into inventory until sold.
• Ordinary & Necessary Expenses (IRC § 162): Seasonal display racks, storage fees, and software subscriptions are deductible when expensed in the correct period.
• Section 179 Expensing (IRC § 179): Qualifying seasonal equipment (e.g., pallet jacks, display units) can be expensed immediately.
• Qualified Business Income (IRC § 199A): Pass-through sellers may deduct up to 20% of net income after inventory and operating costs.
• Self-Employment Tax (IRC § 1401): Net earnings—including seasonal profits—are subject to Social Security and Medicare taxes unless structured as an S-Corp.

Relevant Forms

• Form 1040, Schedule C: Report gross sales, COGS, and deductible expenses.
• Form 4562: Claim Section 179 expensing and depreciation for seasonal equipment.
• Schedule SE (Form 1040): Calculate self-employment tax.
• Form 1040-ES: Pay quarterly estimated taxes on seasonal income.
• Form 1099-K: Reconcile Amazon payouts to your records.

Detailed Example

Scenario: SpookyLights sells LED Halloween strings on Amazon via FBA in 2025:

• Inventory Purchases: 2,000 units × $8 = $16,000
• Freight-In: $2,000
• Seasonal Storage Fees: $1,000
• Equipment (Display Racks): $3,000 (Section 179 eligible)
• Gross Sales (Oct–Nov): $50,000
• Units Sold: 1,800; Units Left: 200

Tax Treatment:

1. COGS (IRC §§ 471/263A):
   • Total inventory basis = $16,000 + $2,000 + $1,000 = $19,000
   • COGS = (1,800 ⁄ 2,000) × $19,000 = $17,100
2. Ending Inventory: 200 × ($19,000 ⁄ 2,000) = $1,900 capitalized
3. Section 179 (IRC § 179): Expense $3,000 display racks on Form 4562
4. Operating Expenses (IRC § 162): Deduct FBA fees, software, and additional seasonal marketing
5. Net Income Before QBI:
   • $50,000 − $17,100 − $3,000 − other expenses = taxable seasonal profit
6. QBI Deduction (IRC § 199A): 20% × qualified net income for additional savings

Step-by-Step Compliance Guide

1. Configure Seasonal SKUs
   • Tag products in Amazon and your accounting system for clear tracking.
2. Record All Inventory Costs
   • Enter purchase price, freight-in, prep, and off-season storage into inventory accounts.
3. Perform Pre- and Post-Season Counts
   • Reconcile FBA inventory reports with physical counts to verify accuracy.
4. Capitalize vs. Expense
   • Capitalize inventory costs until sale; expense software and short-term storage in the season incurred.
5. Elect Section 179
   • Identify seasonal equipment; file Form 4562 by year-end to expense immediately.
6. Reconcile 1099-K
   • Match Amazon payouts to recorded sales; adjust for refunds or fees.
7. Calculate & File Taxes
   • Complete Schedule C and Schedule SE; pay Form 1040-ES estimates in Q4/Jan to cover seasonal spikes.
8. Maintain Documentation
   • Keep invoices, FBA reports, depreciation schedules, and count sheets for at least four years.

Conclusion

Mastering seasonal inventory on Amazon means capitalizing the right costs per IRC §§ 471/263A, strategically expensing equipment via Section 179, and keeping precise counts. Implement these steps in 2025 to optimize cash flow, maximize deductions, and breeze through tax season.

Strong Call to Action

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Disclaimer

Anshul Goyal, CPA, EA, FCA, is a licensed Certified Public Accountant in the U.S. and an IRS-authorized Enrolled Agent. He advises e-commerce entrepreneurs on inventory accounting and compliance. This blog is informational and not a substitute for personalized advice.

About Our CPA

With over a decade of U.S. and international tax expertise, Anshul Goyal helps Amazon sellers streamline inventory workflows, leverage deductions, and scale profitably—season after season.

Frequently Asked Questions

1. How do I value ending inventory for tax?
Use the per-unit cost basis including direct and allocable indirect costs under IRC §§ 471/263A.

2. Can I expense seasonal display racks?
Yes—elect Section 179 on Form 4562 if placed in service by December 31.

3. When do I pay taxes on seasonal profits?
Pay quarterly estimates via Form 1040-ES in Q4 and January to cover peak sales.

4. Do storage fees count as inventory?
Off-season storage is allocable indirect cost—capitalize until sold.

5. How often should I do cycle counts?
At least before and after the season; consider monthly counts during peak.