Amazon settlement reports, explained line by line
A settlement is not a sale, a bank statement or a period. It is a dozen deductions against two weeks of trading — and four of those lines are booked wrong by almost everyone.
Amazon does not pay you for your sales. Amazon pays you what is left of your
sales after roughly a dozen separate deductions, some of which are costs, some
of which are not costs at all, and at least one of which is money you are being
given back. The settlement report is where that all happens, and it is the
single most misread document in ecommerce bookkeeping.
The report is also not a bank statement, a P&L, or a period. It is a
payment cycle — usually 14 days — and it almost never lines up with
your month end. That mismatch is the second problem, and we will come to it.
If you book the Amazon deposit as sales, you have not recorded a sale. You have recorded the residue of a sale.
What is in a settlement, line by line
Amazon groups the report into a handful of transaction types. Here is a
typical fortnightly settlement for an FBA seller doing roughly $30k a month,
with each line placed where it actually belongs in your books.
| Settlement line | Amount | Where it belongs |
|---|---|---|
| Product sales | $14,208.00 | Revenue |
| Shipping credits | $412.00 | Revenue |
| Promotional rebates | −$286.00 | Contra-revenue |
| Sales tax collected (marketplace) | $1,142.00 | Liability — not yours |
| Gross activity | $15,476.00 | |
| Referral fees (8–15%) | −$1,988.00 | Cost of sales |
| FBA fulfilment fees | −$1,704.00 | Cost of sales |
| Monthly storage fees | −$212.00 | Operating expense |
| Long-term storage fees | −$96.00 | Operating expense |
| Sponsored Products advertising | −$1,540.00 | Marketing |
| Refunds to customers | −$742.00 | Contra-revenue |
| Refund commission retained | −$44.00 | Cost of sales |
| FBA inventory reimbursement | $188.00 | Other income — not a sale |
| Sales tax remitted by Amazon | −$1,142.00 | Clears the liability |
| Subscription fee | −$39.99 | Operating expense |
| Deposited to bank | $8,156.01 |
Book the $8,156.01 as revenue and you have understated sales by $6,463.99, recorded none of your $3,692 in Amazon fees, none of your $1,540 in advertising, and no refunds at all — on a settlement where refunds ran at 5% of sales.
The four lines people get wrong
Referral and FBA fees are cost of sales, not an expense
These fees scale directly with units sold, which makes them cost of sales.
Parked in operating expenses, your gross margin looks 25 points better than it
is and every pricing decision you make from it is wrong. On the settlement
above, fees are 23.9% of gross activity. A seller who thinks their gross margin
is 60% when it is 36% will happily fund an ad campaign that loses money on
every order.
Reimbursements are not sales
When Amazon loses or damages your inventory, it reimburses you. That is not
revenue from a customer — it is compensation for stock that has left your
inventory. Booked as sales, it overstates revenue and leaves inventory
overstated by the cost of goods that no longer exist. Two errors from one line.
Marketplace facilitator tax is not your income or your expense
In every state with marketplace facilitator laws, Amazon collects the sales
tax and remits it. It appears on your settlement twice — once collected,
once remitted — and nets to zero. Booking the collection as revenue
inflates your income; booking the remittance as an expense inflates your costs.
Run both through a liability account and the two cancel, which is what actually
happened.
Advertising is not a deduction from revenue
Sponsored Products spend is netted out of your settlement, so it never
appears as marketing spend unless you deliberately record it. Sellers routinely
have no idea what their true advertising cost is, because the money never
visibly left their account. On the settlement above it is 10.8% of gross
activity — almost certainly the largest controllable cost in the business,
and invisible.
The settlement period problem
Settlements run on a 14-day cycle that ignores your month end. A settlement
covering 25 September to 8 October contains revenue belonging to two months. If
you book each settlement in the month it was deposited, then every month
contains part of another month, and neither your monthly P&L nor your
year-on-year comparison means anything.
There are two defensible answers, and one indefensible one:
- Split the settlement at month end using the transaction dates in
the report. Correct, and worth the effort once you are large enough that a
month matters — or the moment anyone else reads your accounts. - Accrue the open settlement at month end as a receivable, then
reverse it. Same result, cleaner audit trail, marginally more work. - Book each settlement in the month it lands and ignore the overlap.
Defensible only if your volumes are steady and nobody is making decisions on
a single month’s figures. It becomes indefensible the moment your sales are
seasonal — which, for most Amazon sellers, they violently are.
Where the real money hides. The settlement report tells you what
Amazon charged you. It does not tell you what each product cost you to make or
buy. Until cost of goods sold is recorded against units sold — not
against stock purchased — you can know your Amazon fees to the cent and
still have no idea which products actually make money. That is a separate job,
and it is usually the more valuable one.
Doing this without losing your evenings
Below roughly 200 orders a month, a summarised journal per settlement is
entirely reasonable: one entry, ten or so lines, fifteen minutes a fortnight.
Above that, the volume of individual transactions makes manual entry a poor use
of anyone’s time, and a sync tool becomes the better answer — with real
trade-offs that deserve their own honest treatment rather than a recommendation.
Either way, the test is the same. Open your P&L. If you cannot see Amazon
fees, advertising spend and refunds as three separate lines, your settlements are
being booked net, and the most important numbers in your business are hidden
inside a single deposit figure.
Questions we get asked
01Why does my Amazon deposit never match my sales figure?
02Should Amazon fees be cost of sales or an expense?
03Do I owe sales tax if Amazon already collected it?
04How do I handle a settlement that straddles month end?
05Are FBA reimbursements taxable income?
Not sure whether this is happening in your books?
Give us view-only access and we will tell you, in plain English, what is misclassified, unreconciled or wrong — within 48 hours. Free, and you are under no obligation to do anything about it.