Knowing how to calculate Amazon seller profit is essential if you want to understand what your business is really earning. Amazon fees, FBA charges, advertising, VAT and stock costs can all affect your margins, while the amount Amazon pays into your bank account rarely tells the whole story. The starting point is to bring your actual sales and costs together, rather than treating an Amazon payout as profit.
I’ve worked with financial systems throughout my career and have also run a small e-commerce business myself. I know how easy it is for stock purchases, marketplace reports and payment transactions to become disconnected. The key is to bring them together consistently.
At a glance: the numbers that matter
| Figure | What it tells you |
|---|---|
| Gross sales | Product sales before refunds and deductions |
| Net sales | Sales less refunds, excluding VAT where appropriate |
| Cost of goods sold | Cost of the stock actually sold |
| Gross profit | Net sales less cost of goods sold |
| Operating expenses | Amazon fees, advertising and other relevant business costs |
| Net profit before tax | Profit after those expenses |
Why Amazon Sales and Bank Deposits Are Not the Same
When working out how to calculate Amazon seller profit, it’s important to start with your actual sales rather than the payments Amazon makes into your bank account.
Amazon settlements typically include sales proceeds, refunds, selling fees and other adjustments. As a result, the amount deposited into your bank account is not the same as your turnover or profit
Instead, use the transaction and settlement reports in Amazon Seller Central to identify your sales, refunds, Amazon fees and any amounts still held by Amazon. Recording these separately will give you a more accurate picture of your business’s financial performance.
If you're VAT registered, you'll also need to account for VAT correctly so that your sales and expenses are reflected at the appropriate amounts.
How Stock Costs Affect Your Amazon Seller Profit
When calculating Amazon seller profit, it’s important to distinguish between stock you've purchased and stock you've actually sold. Buying inventory doesn't automatically mean the full cost should be deducted from your profit straight away.
For example, if you purchase 500 units but sell only 200, the cost of the remaining 300 units will normally be included in your closing stock rather than treated as an expense, subject to any necessary adjustments for damaged, obsolete or unsaleable goods
The cost of stock sold should include more than just the purchase price. Import duties, shipping costs to bring goods into your business and other directly attributable costs may also need to be included. Recoverable VAT is normally excluded
Remember to include inventory held at Amazon fulfilment centres when calculating your closing stock. Although Amazon stores these products on your behalf, they still form part of your business's inventory.
This approach ensures that the cost of stock is matched to the sales it generates, giving you a more accurate picture of your Amazon business's profitability.
How Amazon Fees and Business Expenses Affect Your Profit
Amazon fees can take a significant bite out of your profits, so it's important to account for all the costs involved in running your business.
These include Amazon referral fees, Fulfilment by Amazon (FBA) charges, storage fees, seller subscriptions and advertising costs. You'll also need to consider other business expenses, such as software subscriptions, insurance, external storage and accountancy fees.
Some of these costs are deducted directly from your Amazon settlements, while others are paid separately. Therefore, to calculate your Amazon seller profit accurately, you need to capture both.
It's also worth reviewing profitability at individual product level rather than looking only at your overall sales. A product that sells particularly well isn't necessarily your most profitable. Once you've accounted for Amazon fees, advertising, fulfilment costs and customer returns, the actual profit margin may be surprisingly small.
Understanding these costs will help you identify which products are genuinely making money and where there may be opportunities to improve your margins.
Worked Example: Calculating Amazon Seller Profit and Profit Margins
So, how do you calculate Amazon seller profit in practice? Let's look at a typical UK Amazon seller to see how sales, stock costs, Amazon fees and other business expenses affect the final profit
In this example, the seller is not VAT registered, and all the figures relate to the same month.
Although the business generates £12,000 in gross sales, its actual profit is considerably lower once refunds, the cost of stock sold and operating expenses are taken into account
Here's how the figures break down:
| Gross product sales | £12,000 |
| Customer refunds | (£500) |
| Net sales | £11,500 |
| Cost of goods sold | (£4,000) |
| Gross profit | £7,500 |
| Amazon referral fees | (£1,725) |
| FBA fulfilment and storage | (£1,150) |
| Amazon advertising | (£900) |
| Software and other expenses | (£325) |
| Net profit before tax | £3,400 |
Net profit margin: £3,400 ÷ £11,500 × 100 = 29.6%
The business has made a net profit before tax of £3,400, giving it a net profit margin of:
£3,400 ÷ £11,500 × 100 = 29.6%
In other words, for every £100 of net sales, the business retains approximately £29.60 in profit before tax
However, accounting profit is not the same as the amount Amazon pays into your bank account. Amazon settlements, stock purchases and the timing of other payments can all affect cash flow.
Why Your Amazon Bank Payout Is Different from Your Profit
One of the most common mistakes Amazon sellers make is assuming that the money Amazon pays into their bank account represents their profit. However, Amazon payouts, sales revenue and accounting profit are three different figures
To illustrate the difference, let's use the same example as above, where the business generated £12,000 in gross sales and made a net profit before tax of £3,400
Now imagine that Amazon holds back £1,000 for a future settlement. After deducting customer refunds, Amazon fees and advertising charges, the amount paid into the seller's bank account would be calculated as follows.
| Gross sales collected | £12,000 |
| Customer refunds | (£500) |
| Amazon referral fees | (£1,725) |
| FBA fulfilment and storage | (£1,150) |
| Advertising deducted from settlement | (£900) |
| Amount before reserves | £7,725 |
| Held for a later settlement | (£1,000) |
| Illustrative bank payout | £6,725 |
In this example, Amazon deposits £6,725 into the seller's bank account. However, this is neither the business's net sales of £11,500 nor its accounting profit of £3,400.
The difference arises because Amazon deducts certain charges before making a payment, while other business expenses are paid separately.
Importantly, the £1,000 retained by Amazon is not an expense. It remains money owed to the seller and should be reconciled against future settlements.
Similarly, the £4,000 cost of stock sold and £325 of other operating expenses reduce accounting profit but haven't been deducted from this particular Amazon payment.
In practice, Amazon settlements may also include transactions from earlier periods, VAT adjustments and other deductions. This is why it's essential to reconcile Amazon settlement reports rather than relying solely on bank deposits when preparing your accounts.
How to Calculate Amazon Seller Profit for Individual Products
Understanding how to calculate Amazon seller profit for each product is just as important as knowing whether your business is profitable overall
A product might sell well and generate plenty of revenue, but that doesn't necessarily mean it's making much money. Once you've deducted the cost of stock, Amazon referral fees, fulfilment charges and advertising, the amount left over can be surprisingly small
For example, let's look at a product selling for £19.99 through Fulfilment by Amazon (FBA). The seller isn't VAT registered, and the figures below show the costs associated with a single sale.
| Selling price | £19.99 |
| Product cost including inward freight | (£7.00) |
| Amazon referral fee | (£3.00) |
| FBA fulfilment charge | (£3.25) |
| Average advertising cost per sale | (£2.00) |
| Contribution before overheads | £4.74 |
Contribution margin: £4.74 ÷ £19.99 × 100 = 23.7%
Although the product sells for £19.99, it generates just £4.74 towards overheads and profit, equivalent to approximately 23.7% of the selling price.
However, this isn't the final net profit. You'll still need to consider other costs, including storage fees, customer returns, software subscriptions and general business overheads
For VAT-registered sellers, the calculation should normally use the VAT-exclusive selling price and costs excluding recoverable VAT. Actual Amazon fees will also vary depending on the product category, size, weight and fulfilment programme
Why does this matter? Analysing profitability at product level helps you identify which products are worth promoting, where advertising costs are eating into margins and whether your selling prices need reviewing.
Why Your Amazon Business Can Be Profitable but Short of Cash
Making a profit doesn't necessarily mean your Amazon business has plenty of money in the bank. Understanding the difference between profit and cash flow is essential when managing your finances.
For example, you might have invested heavily in new stock, paid a Corporation Tax or VAT bill, repaid a business loan or be waiting for Amazon to release funds from a settlement. All these can reduce your available cash without necessarily reducing your accounting profit.
The reverse can also happen. A large Amazon payout might include money from sales made in an earlier period, making your bank balance look healthier than your current trading performance suggests
For this reason, review your profit and loss account alongside your cash flow each month. This will help you understand not just whether your Amazon business is making money, but whether it has enough cash to pay suppliers, cover expenses and invest in future growth.
For a more detailed explanation, read our guide: Profitable Business but No Cash? Here's Where the Money Goes.
Which Amazon Seller Central Reports Do You Need to Calculate Your Profit?
Amazon Seller Central provides much of the information you need to calculate your Amazon seller profit, but the figures are spread across several reports. Relying on your bank deposits or a single sales report can give you a misleading picture of how your business is performing
Start with the transaction and settlement reports in the Payments section of Seller Central. These show sales, refunds, Amazon fees, amounts held in reserve and payments made to your bank account
You'll also need to review advertising invoices, VAT documents and inventory reports to make sure all relevant costs are included. It's important to use consistent reporting periods and reconcile the figures against your accounting records and bank receipts.
If you sell through multiple Amazon marketplaces or deal in different currencies, take particular care to avoid recording sales twice, overlooking fees or incorrectly converting foreign currency transactions
Accounting software and Amazon integrations can save considerable time, but they still need regular checking. An automated feed doesn't guarantee accurate accounts, particularly where refunds, reserves, VAT or transactions across different marketplaces are involved.
In my experience, the most reliable approach is to reconcile your Amazon reports each month. This helps identify discrepancies early and gives you a clearer understanding of your actual profitability.
How VAT and International Sales Affect Your Amazon Seller Profit
VAT can make a significant difference when calculating Amazon seller profit, particularly if you sell internationally or hold stock in Amazon fulfilment centres outside the UK.
If your business is VAT registered, you would normally exclude VAT charged to customers from your sales revenue and deduct recoverable input VAT from your business costs. This ensures you're calculating profit using the correct figures rather than treating VAT collected on behalf of HMRC as income.
However, VAT becomes more complicated when you're selling through Amazon across different countries.
Four VAT Areas to Check
Marketplace VAT Does Not Remove Every Seller Obligation
In certain circumstances, Amazon is treated as the supplier for VAT purposes and accounts for VAT on sales made through its marketplace. However, this doesn't necessarily remove your own VAT registration, record-keeping or reporting responsibilities.
For UK Amazon sellers expanding into Europe or other international markets, it's particularly important to understand where stock is being stored and how sales are being fulfilled before deciding which VAT rules apply.
As a result, getting the VAT treatment right can help you avoid overstating your profits, incorrectly reclaiming VAT or overlooking overseas tax obligations.
Common Amazon Accounting Mistakes That Can Distort Your Profit
When reviewing Amazon sellers' accounts, there are several issues I'd look for straight away. One of the most common is recording Amazon bank deposits as sales, rather than accounting for the underlying transactions. This can result in turnover being understated and Amazon fees being missed.
Other problems include treating all stock purchases as expenses, even when some of the stock remains unsold, overlooking advertising charges and recording customer refunds twice.
Amazon reserves are another area that can cause confusion. Money held back by Amazon doesn't simply disappear, and these balances need to be reconciled to make sure the accounts reflect what the business is still owed.
VAT can also cause problems, particularly where VAT-inclusive sales figures are mixed with VAT-exclusive costs or transactions from different marketplaces are treated in the same way.
Although these aren’t always obvious mistakes, they can make a substantial difference to reported profit and VAT liabilities.
I'd always recommend reconciling Amazon transactions monthly. It's considerably easier to investigate a discrepancy while the transactions are still fresh than to untangle twelve months of settlements, refunds and fees when the year-end accounts are being prepared.
Which Amazon Profit Figures Should You Review Each Month?
Once your Amazon transactions are being recorded correctly, the next step is to use those figures to understand how the business is performing.
I wouldn't focus solely on total sales. A business can increase its turnover considerably without seeing a corresponding improvement in profit, particularly if Amazon fees, advertising costs or product costs are rising..
Instead, I'd recommend keeping an eye on your net sales, gross profit margin, Amazon fees as a percentage of sales, advertising costs, stock levels and available cash.
If you sell a wide range of products, it's also worth looking at profitability by product rather than relying on the overall figures. You may find that a relatively small number of products generate most of your profit, while others tie up cash in stock and advertising without producing much of a return.
Ultimately, the real benefit of knowing how to calculate Amazon seller profit is being able to act on the information. Regular reviews can help you identify falling margins, adjust prices, control advertising expenditure and avoid investing more money in products that aren’t delivering a worthwhile return.
Specialist Accounting and Tax Support for Amazon Sellers
Selling successfully on Amazon is one thing. Understanding how much money your business is actually making is another
At The Friendly Accountants, we work with Amazon sellers and other e-commerce businesses to help them make sense of their marketplace transactions, understand their profitability and meet their accounting and tax obligations
Whether you're struggling to reconcile Amazon settlements, unsure how to account for stock and fees, or finding that your sales are growing but your profits aren't, we can help you get a clearer picture of what's happening
Our experience covers marketplace bookkeeping, annual accounts, Corporation Tax, VAT and the accounting challenges that come with selling across multiple platforms and international markets.
The aim isn't simply to produce accurate accounts. It's to give you financial information you can actually use to run your business.
Are your Amazon sales growing, but you're not seeing the profits you expected?
If you're struggling to reconcile Amazon settlements, unsure whether your products are genuinely profitable or simply want more reliable financial information, we'd be happy to help.
Get in touch with The Friendly Accountants to discuss your Amazon accounting and tax requirements, or find out more about our specialist e-commerce accounting services.
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