Product Research Guide for Creators Going Global on Amazon

Introduction

Successful global selling on Amazon begins long before your first listing – it starts with targeted product research. Beyond identifying high-demand items, savvy creators can integrate tax planning into their research phase, leveraging R&D credits for product development and optimizing inventory costing. This guide helps Amazon sellers go global in 2025 with a research framework that boosts profitability and maximizes tax benefits.

Tax Code References

• Research & Development Credit (IRC § 41): Expenses for developing or improving products may qualify for the R&D tax credit.
• Research Expenditures (IRC § 174): Allows election to deduct or amortize R&D costs in the year paid or over 5 years.
• Inventory Costing (IRC §§ 471 & 263A): Capitalize direct and indirect costs into inventory until sale.
• Ordinary & Necessary Expenses (IRC § 162): Market research subscriptions, sample costs, and trial runs are deductible when ordinary and necessary.
• Qualified Business Income Deduction (IRC § 199A): Net income reductions from research expenses may increase your 20% pass-through deduction.

Relevant Forms

• Form 6765: Claim the R&D credit.
• Form 4562: Section 179 expensing and depreciation on product-testing equipment.
• Form 1040, Schedule C: Report COGS, research subscriptions, and sample costs.
• Form 1040-ES: Quarterly estimated tax payments.
• Schedule SE (Form 1040): Calculate self-employment tax.
• Form 1099-K: Third-party payment reporting for sales.
• Form 8995/8995-A: Compute QBI deduction.

Detailed Example

Scenario: NovaDesign tests new eco-friendly phone stands in Q1–Q2 2025:

• Sample Costs: $8,000 for prototypes and shipping.
• Market Research Tools: $2,000 subscription.
• Testing Equipment: $5,000 3D printer (Section 179 eligible).
• First-Half Sales on Amazon: $60,000 with COGS $30,000.

Tax Treatment:

1. R&D Credit (IRC § 41): 20% credit on $8,000 qualified research = $1,600 credit on Form 6765.
2. Deduct or Amortize Research (IRC § 174): Elect immediate deduction of $10,000 or amortize over 5 years.
3. Section 179 (IRC § 179): Elect to expense $5,000 printer on Form 4562.
4. Inventory Costing (IRC §§ 471/263A): Include direct costs in COGS; ending inventory tracked per unit cost.
5. QBI Impact (IRC § 199A): Lower taxable income increases potential 20% deduction.

Step-by-Step Compliance Guide

1. Define Research Activities:
   • Document prototype design, testing, and market analysis steps.
2. Track Qualified Expenses:
   • Log labor, prototype costs, software subscriptions, and testing materials.
3. Maintain Contemporaneous Records:
   • Keep detailed project memos, invoices, and timesheets to substantiate R&D credit.
4. Elect IRC § 174 Treatment:
   • On your tax return, choose immediate deduction or amortization.
5. File Form 6765:
   • Calculate and claim your R&D credit when you file.
6. Record Equipment Purchases:
   • Use Form 4562 to elect Section 179 expensing or depreciation.
7. Manage Inventory Costs:
   • Capitalize direct and allocable indirect product costs into inventory per IRC §§ 471/263A.
8. Deduct Ordinary Expenses:
   • Claim market research subscriptions and sample shipping on Schedule C.
9. Calculate QBI Deduction:
   • Complete Form 8995/8995-A after reducing net income.
10. Pay Estimated Taxes:
    • Use Form 1040-ES quarterly to cover income and self-employment tax.

Conclusion

Integrating tax-savvy research into your global Amazon strategy can unlock valuable R&D credits, accelerate equipment deductions, and optimize inventory costing. By documenting activities, tracking expenses, and filing the right forms, you’ll drive product success and strengthen your bottom line.

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Disclaimer

Anshul Goyal, CPA, EA, FCA, is a licensed Certified Public Accountant in the U.S. and an Enrolled Agent before the IRS. He represents clients in tax litigation and specializes in cross-border e-commerce and R&D tax credits. This blog is informational and not a substitute for professional advice.

About Our CPA

With over a decade of U.S. and international tax expertise, Anshul Goyal helps Amazon creators leverage tax credits, streamline compliance, and scale their global ventures.

Frequently Asked Questions

1. What qualifies as “qualified research”?
Activities that meet the IRS’s four-part test: permitted purpose, elimination of uncertainty, trial and error, and technological advancement.

2. Can I deduct my research subscriptions?
Yes – as ordinary and necessary expenses under IRC § 162.

3. Should I amortize or deduct R&D costs?
Immediate deduction accelerates benefits; amortization smooths deductions over future years.

4. How do I substantiate the R&D credit?
Retain project documentation, payroll records, and invoices that map to research activities.

5. Does the R&D credit reduce my QBI deduction?
No – the credit reduces your tax liability, not taxable income used for QBI calculations.