Amazon Settlement Report: How to Record It in Your Books

Amazon settlement report explained: what do the columns tell me?

An Amazon settlement report is the line-by-line statement behind one transfer to your bank. One settlement has one total and one deposit date, so the settlement is the unit you match to the bank, and the lines inside it are what you record.

The rule: record each settlement as gross sales, refunds, fees and advertising, with tax Amazon remits kept apart and the deposit as the last step; never post the net deposit as sales. It is more than a posting job when settlements are months behind, a filed year booked net deposits as sales, or Form 1099-K differs from your books by more than fees, refunds, tax and timing explain. Those cases may need the open months bridged or the year rebuilt from the settlement files; the section near the end covers them.

Amazon's developer documentation says Amazon schedules these reports itself; you cannot request or schedule one. The column names below are from its Flat File V2 report, which replaces the older flat file and XML reports (marked deprecated); the older ones lay out price columns differently.

Three things make the file harder than it looks:

• Everything sits in one amount column. The documentation says amounts always populate a single column, so a sale and a fee look alike until you read amount-type and amount-description.
• Amounts use the marketplace's number format. The documentation's example is 95,00 for the EU instead of 95.00. A spreadsheet can read a decimal comma as text or as a thousands mark.
• The documentation lists the columns, not every value in them. Build your account mapping from the values in your own reports and keep the mapping with the books.

Gather before you start: every settlement file for the period, saved as downloaded; the bank statements that show the deposits; the year's Form 1099-K; and last year's closing entries, so you know what Amazon owed you, or you owed it, on day one.

Why doesn't my Amazon deposit match my sales for the same dates?

A deposit is a net figure and a sales report is gross, so they differ by everything Amazon deducts, adds or holds, and by the dates each one uses. The usual causes:

• Fees, advertising, other charges and any federal backup withholding deducted before the transfer.
• Refunds posted in this settlement, including refunds of sales from earlier settlements.
• Tax Amazon collects and remits for you (see the sales tax section below).
• Money Amazon holds back, or releases from an earlier period.
• Dates. A sales report is often built by order date. A settlement lists lines by the date they posted, and the bank shows the deposit date. These are three different dates, and Form 1099-K has a timing rule of its own (see the table in the Form 1099-K section below).

Some charges are billed to a card or the bank instead of netted in a settlement. They are not in the deposit; book each from its own statement, never from both.

Compare the same transactions on the same date basis before you treat a difference as missing income. Publication 583 says the bank statement, your checkbook and your books should agree, and recommends reconciling each month. The general method for every platform is in Reconciling sales, payouts and Form 1099-K.

How do I post an Amazon settlement as a journal entry that matches the payment statement?

Post each settlement as one entry that sends every line through a clearing account, then match the bank deposit to the clearing account, not to sales. The clearing account holds what Amazon owes you, or you owe it, until the money moves. This is a method for tracing, not an IRS-prescribed entry; the IRS lets you use any system that clearly shows your income and expenses.

1. Create one clearing account for Amazon. Use a generic name that says what it is.
2. Group the lines by the account you mapped them to, using transaction-type, amount-type and amount-description. Add up each group.
3. Post one entry per settlement, or one per month if it crosses a month-end (see below). Credit sales; debit returns and allowances (an account that reduces sales), fee expense and advertising; debit the clearing account for the amount that balances the entry (credit it if that is negative). Money Amazon holds back is not a sale or an expense: it stays in clearing, and a later release is not a new sale. Put the settlement-id in the memo.
4. Post the bank deposit as a second entry: debit the bank, credit the clearing account. If your bank feed already created the deposit, match it to the clearing account instead of coding it to sales. If the deposit went to an account that is not the business's, post the settlement the same way and settle the deposit against an owner account, never sales; see Fixing commingled business and personal funds.
5. Check that debits equal credits and that the clearing balance equals what Amazon still holds or owes you. It is zero only when nothing is held.

The first example at the end of this page shows both entries with numbers. Publication 583 describes a double-entry system as one where total debits equal total credits after posting. If an order sync or a connector also creates the sale, the same income can be counted twice: see Duplicate income in your books.

Which settlement lines are income, which are expenses, and which are neither?

Item sales are income, refunds reduce it, fees and advertising are expenses, and tax Amazon collects and remits under a marketplace law, money held back, backup withholding and the transfer to your bank are neither. The IRS lists fees, credits, refunds, shipping and discounts as amounts that Form 1099-K does not subtract, and says you can deduct them from the gross amount.

How do I book Amazon refunds and reimbursements?

In books kept by posted date, a refund reduces sales in the period it posts. A reimbursement from Amazon is not a sale.

Refunds appear as lines inside a settlement, often for a sale that was in an earlier settlement. Post the refund when it posts, to returns and allowances, not as a negative expense. If Amazon credits back part of a fee on the refunded item, that credit reduces the same fee account the fee went to. A refund posted in January for a December sale is a January line; ask your preparer whether the year-end needs an estimate for returns not yet posted. The general method is in Recording refunds in the books.

A negative line, or even a negative settlement total, is still a line. Post it and let the clearing account show that you owe Amazon until a later settlement or a payment clears it. Do not net it against an unrelated sale.

Do not post a reimbursement for lost or damaged units to sales. How to book it against the inventory loss is in Amazon FBA fees and inventory.

What do I do with sales tax Amazon collects, and with tax on sales outside Amazon?

Keep tax that Amazon collects and remits under a marketplace law out of sales and out of your sales tax payable. Tax you collect yourself, including on sales through your own site, stays yours to track and remit; whether you must collect on those sales, and where, is in When you must collect sales tax.

State marketplace laws put collection on the marketplace. In Texas, a marketplace seller is not responsible for collecting and remitting tax on marketplace sales if the provider has certified that it assumes those duties; without a certification, the seller should collect until one arrives. A Texas seller still needs a Texas tax permit and must file returns, even if all its sales go through the marketplace. In California, the marketplace facilitator is the retailer responsible for collecting and paying the tax on facilitated sales, and the seller should keep documentation showing that. Rules differ by state; these are two examples.

In the books:

• Post tax lines to a separate pass-through account, not to sales. If the report shows tax added and then withheld for remittance, the two should offset and the account should end at zero after each settlement.
• If tax is left in your deposit, you collected it. Carry it as a liability until you remit it. Publication 334 says tax imposed on the buyer, which you must collect and pay over, is not income, but tax imposed on you as the seller and collected from the buyer is included in gross receipts. Which applies depends on your state, so ask your preparer. Tax you collected and did not remit can become a personal debt of the owner or, in some states, of a responsible officer or partner; the payout guide gives the Texas and California rules.

Form 1099-K gross can include sales tax paid with the sale (see below).

A settlement runs across two months or two years: which period does each line belong in?

Start with each line's posted date, then check it against your accounting method. The bank follows the deposit date. A settlement period can cross a month-end or a year-end; check settlement-start-date and settlement-end-date on every file.

Sort the lines by posted date, subtotal each month, and post each slice to its own month. The slice that has posted but not yet been deposited stays in clearing, so at month-end the clearing balance equals what Amazon owes you.

For a year-end, the books and the return can differ, because when income counts depends on the accounting method (Publication 538). Under accrual, income is generally included in the year when all events that fix your right to it have occurred and the amount can be determined with reasonable accuracy. Under cash, it is income you actually or constructively receive. Whether money sitting in an Amazon balance at year-end counts as received depends on facts, such as whether Amazon acts as your agent and what restrictions apply, and the sources do not settle it for every seller. Keep the year-end clearing balance visible, note any line you moved to a different period, and settle the method with your preparer before year-end. See Cash or accrual for a small business.

How do I reconcile Amazon settlements from gross to net, to the bank and to Form 1099-K?

Tie in two steps: each settlement total to one bank deposit, then the year's gross sales to the form.

Settlement to bank. The settlement's total-amount should equal a bank deposit on or near its deposit-date, in the same currency. Tick each match off on the clearing account. A settlement with no deposit, or a deposit of a different size, needs an explanation from Amazon's records. Do not plug the difference to sales or other income.

Year to Form 1099-K. Box 1a is the gross amount of the year's reportable transactions, without regard to credits, discounts, fees, refunded amounts, shipping or other amounts. Boxes 5a through 5l show the gross by month. Compare the form to your gross sales before refunds, not to deposits and not to net sales. Box 4 shows federal backup withholding, which a payer must apply when the payee's tax ID is missing or wrong (form instructions); a correct tax ID stops it (IRS). Check box 4 against the settlements and give the total to your preparer.

If the form is wrong or duplicated, the IRS says to ask the issuer for a corrected form, because the IRS cannot correct it; see Wrong or corrected platform tax form. Who gets a form, and at what amount, is in the 1099-K threshold guide. You report the income with or without a form.

If a gap remains after these items, do not force it. An unexplained gap can mean a settlement, a month or a channel is missing from the books.

What records do I keep for each settlement, and for how long?

Keep the source document for every entry, so any line in the books traces back to a file you can produce. Publication 583 says computerized records must reconcile with your books and return, with enough detail to identify the underlying source documents.

For each settlement:

1. The settlement file as downloaded, unedited, plus your working copy with the account mapping.
2. The bank line or statement it matched, with the settlement-id noted.
3. The journal entry, with the settlement-id in the memo.
4. Any order or fee report you used to explain a line.

For the year: the Form 1099-K, any correspondence with the issuer about corrections, and the clearing balance by settlement.

Keep records that support an item on a return until the period of limitations for that return runs out (Publication 583). That is generally 3 years after the return is filed, and a return filed before its due date counts as filed on the due date. It is longer in some cases, such as income left off the return or a return never filed, and state rules can be longer. See How long to keep business records.

When do settlements stop being a spreadsheet job?

A spreadsheet works while each settlement is posted soon after it arrives, one account mapping covers every line, and the year ties to Form 1099-K. It stops working when:

• Settlements are months behind, so the clearing balance has nothing behind it.
• A filed year booked net deposits as sales. Sales, fees and refunds are all wrong in the books, and whether the return needs amending depends on how gross receipts and costs were reported.
• The form differs from the books by more than refunds, fees, tax and timing explain.
• Sales run through more than one marketplace, currency, seller account or entity.
• A lender or buyer needs statements that tie to the form.

When these apply, there are two ways forward. A bridge adds the missing months from the settlement files. A rebuild re-posts the year from them. Which one fits, and whether months already filed can stay as booked, depends on what the return reported and what any lender will need. For what drives the fee, see Ecommerce bookkeeper: cost and scope.

Example

These examples are illustrative; all amounts are in US dollars.

One two-week settlement

A settlement covers two weeks: item sales $10,000, refunds $600, selling and fulfillment fees $3,100 and advertising $400. The deposit is $5,900, and Amazon holds nothing back.

The books show $10,000 of sales, $600 of refunds, $3,500 of fees and advertising, and $5,900 in the bank. Clearing is back to zero.

A settlement that crosses a month-end

Suppose a settlement runs from March 25 to April 8 with $4,000 of sales and $1,000 of fees. Amazon deposits $3,000 on April 10. Lines posted by date split between the two months; assume those dates also put them in the right months for the business's accounting method.

At March 31 the books show $1,125 owed by Amazon in clearing, and the bank shows nothing. The April 10 deposit of $3,000 clears the $1,125 from March and the $1,875 from April. Booking the whole settlement in April would leave March sales $1,500 too low. The same split applies to a settlement that crosses a year-end, though the return's treatment depends on the accounting method.

Form 1099-K higher than the books

A sole proprietor sells only on Amazon. The year's Form 1099-K shows $240,000 in box 1a. The books show $171,000 of sales because each net deposit was booked as a sale. The $69,000 gap is $15,000 of refunds, $46,000 of fees and $8,000 of advertising that Amazon deducted before each deposit.

The rebuilt gross ties to the form, assuming no sales tax, shipping, backup withholding or other-channel differences; check those first on a real form. The net is the same only if the fees, refunds and advertising were not also entered from a card or bank feed. If they were, they were deducted twice. The same question applies to the filed return: if it reported $171,000 as gross receipts with no deduction for those costs, its gross receipts are $69,000 below box 1a; if it also deducted them, they were deducted twice. The filed return shows which, so check it before changing any month.

Different for you?

• Settlements are months behind, or a filed year booked net deposits as sales: the open months may need a bridge, or the year may need rebuilding from the settlement files; the return and any lender need numbers that tie to those files. Take that to bookkeeping; for longer gaps see Catching up on overdue books.
• Form 1099-K differs from the books by more than fees, refunds, tax and timing explain: the gap may be a missing settlement, channel or entity. Bring the settlement files and the form to bookkeeping, and see Wrong or corrected platform tax form if the form itself is wrong.
• You want the monthly Amazon routine and software needs: see Amazon seller bookkeeping.
• FBA fees, inventory value, lost units or cost of goods sold: see Amazon FBA fees and inventory.
• You need to place sales and fees on the income tax return: see Online seller income tax.
• Income is counted twice after a sync or an invoice: see Duplicate income in your books.
• You sell outside Amazon, or store inventory in several states: see When you must collect sales tax.
• You are weighing a bookkeeper: see Ecommerce bookkeeper: cost and scope.
• You sell on Amazon in another currency, or your LLC is owned from outside the US: see Foreign currency accounts in US books and Marketplace payouts in a foreign-owned LLC.
• Your business keeps books in Canadian dollars: see US-dollar sales and marketplace payouts.