So, You’re a Restaurant Owner with an Online Side Hustle?
Let’s not pretend this isn’t happening: the food business has always been tough, but post-pandemic? Even tougher. So what do smart restaurant owners do? They look for new revenue streams. Maybe you’ve started bottling that killer hot sauce or dry rub and tossing it up on Amazon FBA. Seems easy enough—until tax season hits, and suddenly you’re in a spreadsheet spiral, staring at COGS and wondering what the heck you’re actually being taxed on.
Here’s the thing: Amazon FBA makes fulfillment seamless. But the backend—your inventory tracking, cost reconciliation, and tax treatment? Not so much.
Wait, Is Inventory Really That Big of a Deal?
Yes. Yes, it is. Especially when Amazon’s fulfillment centers are storing, shipping, and sometimes even relocating your products across state lines. That’s not just a logistics detail—it’s a tax trigger.
Here’s why:
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Inventory held in different states can create nexus, meaning you might owe sales tax in those states.
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Your accounting method (cash vs. accrual) drastically changes how your inventory and income are reported.
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Unsold inventory? That can inflate your taxable income if you’re not accounting correctly.
And just to be clear—if you’re using accrual accounting (and if you want to scale, you probably should be), your inventory gets treated as an asset. That means its value affects your gross profit and your taxable income.
“But I’m Just Selling Some Spice Blends on the Side…”
Totally fair. You’re not trying to become a CPG giant. But even if it’s a modest volume, the tax impact can be surprisingly large.
Here’s a quick scenario:
You buy $10,000 worth of ingredients, bottle them, and send the product to Amazon warehouses. You only sell half by year-end. If you’re not tracking that leftover inventory properly? You might accidentally deduct the full $10K as COGS—only to have the IRS come knocking later.
And it’s not just the IRS you need to worry about. Amazon reports your FBA revenue to the state and federal authorities. If your tax return doesn’t match? Red flag.
Tools Are Great—But Only If You Use Them Right
Honestly, QuickBooks or Xero can help, especially with tools like A2X that sync Amazon data with your books. But these aren’t “set-it-and-forget-it” systems. Garbage in, garbage out, as the saying goes.
Some nuances those platforms won’t catch unless you set them up right:
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Inventory stored in multiple Amazon facilities? That can trigger multi-state tax filings.
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Returns and refunds? Need to be matched to the correct reporting period.
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Fees and storage charges? These can sneakily cut into your margins—and your taxable income—if not categorized correctly.
Here’s What We Tell Our Food Biz Clients
Whether you’re selling seasoning packs or pre-packaged baking mixes, we tell restaurant clients who sell on Amazon this: treat your e-commerce branch like its own business.
Some key moves that’ll keep you sane—and compliant:
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Track inventory movement monthly, not just at year-end.
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Use accrual accounting if your volume is growing. It’s cleaner and gives you visibility into profit trends.
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File for sales tax permits in states where Amazon stores your goods (yes, even if you never set foot there).
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Reconcile Amazon disbursements with actual sales and fees—manually, if needed.
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Keep clear separation between your restaurant ops and your e-commerce books.
What If You Don’t Do This?
Well, you might be fine for a year or two. But as Amazon tightens its reporting and states get hungrier for tax revenue, it’s not a matter of if you’ll get a notice—it’s when.
We’ve seen it before: restaurant owners forced to pay back taxes, penalties, and interest because they didn’t know their BBQ rub sitting in a Texas fulfillment center triggered a tax liability. That rub was spicy in more ways than one.
Final Bite: It’s Not Just About the Taxes
Yeah, taxes are a big deal. But there’s also peace of mind, clean financials, and—honestly—just knowing where your money’s going. When you’re running both a kitchen and a Shopify storefront, the last thing you need is chaos in the books.
You’ve put time, energy, and your name into this business. Don’t let sloppy accounting sabotage the growth you’re working toward. Whether it’s a CPA, a fractional controller, or a plug-and-play accounting team (hey, that’s us), get the help you need before things get messy.
