Every two weeks Amazon transfers an amount to you. The temptation is to book that amount as revenue and call it a day. That is wrong — and since the 1099-K reports your gross sales to the IRS, it is a mistake that eventually surfaces. Here is how it should work.

The deposit is sales minus a stack of fees

Sell a product for $59.95 and Amazon first withholds its referral fee (typically 8–15% depending on the category), FBA fulfilment fees if you use them, and nets refunds, advertising charges and occasional reserves against the balance. What you receive is the remainder. The settlement report shows, line by line, what happened.

For your books the rule is: the full sales price is your revenue, and the withheld fees are deductible business expenses. Book only the deposit and you under-report revenue while missing cost deductions at the same time.

A worked example

  • Sales price (revenue): $59.95
  • Referral fee (expense): − $9.00
  • FBA fulfilment fee (expense): − $4.75
  • Deposit to your bank: $46.20

In your books this belongs as $59.95 revenue and $13.75 expenses — not as $46.20 revenue. At hundreds of orders per settlement this is impossible to keep up by hand; a proper connection books it automatically, per settlement, onto the right accounts.

Reserves are receivables, not lost revenue

Amazon sometimes holds part of your balance as a reserve. Book it as a receivable from Amazon: the revenue has been earned, only the payout shifts. Track it separately and both your cash picture and your revenue stay correct.

The 1099-K: why gross books save you letters

Amazon reports your unadjusted gross sales to the IRS on form 1099-K. The IRS can put your tax return next to that number. Books built on net deposits fail that comparison instantly — the reported gross is simply higher than what you declared. Books built gross reconcile to the 1099-K line by line.

Checklist

  • Revenue booked at the full sales price per order
  • Referral, FBA and advertising fees booked separately as expenses
  • Refunds adjust revenue explicitly
  • Reserves tracked as receivables from Amazon
  • Year-end: books reconcile to the 1099-K