Year-End COGS Tax Pack

When to use this

• Year just ended and the CPA wants the books by Feb 15
• Switching CPAs and need to hand over a clean historical schedule
• Quarterly tax estimates and you want COGS dialed in
• Pre-acquisition cleanup. A buyer wants 3 years of audited COGS

The framework. The Year-End COGS Pack

Step by step

1. Pull the Inventory Valuation Report. Seller Central > Reports > Fulfillment

   Inventory > Inventory Valuation Report. Date = January 1, 12:00 AM UTC of the new year. Do not use Manage Inventory. It updates live and is useless for tax.

2. Pull all Settlement Reports for the tax year. Reports > Payments > All Statements. Download every settlement that closed in the tax year. Sum unit sales per SKU.
3. Pull Purchase Orders and freight invoices. From the supplier portal or internal records. Calculate landed cost per SKU = unit cost + freight + duties
   • 3PL inbound prep.
4. Calculate weighted-average cost per SKU. (Beginning inventory value + purchases during year) divided by (beginning units + units purchased). Apply this to units sold for COGS.
5. Identify write-down candidates. Pull Inventory Age Report. Flag any SKU aged 365+ days, any unfulfillable inventory, any damaged units. Write down to net realizable value. This is a deductible expense, do not skip it.
6. Reconcile. Beginning inventory + purchases. COGS. write-downs = ending inventory. Ending inventory from this calc must match Tab 1 within 1%.
7. Run the quality check, then deliver to CPA as 5-tab Excel.

Output format

## Year-End COGS Pack. [Tax Year YYYY]

**Tab 1 - Inventory Valuation Summary**
SKU | Units on hand Jan 1 | Landed cost | Ending inventory $
[rows]
TOTAL ENDING INVENTORY: $[X]

**Tab 2 - COGS by SKU**
SKU | Units sold | Weighted avg cost | COGS $
[rows]
TOTAL COGS: $[X]

**Tab 3 - Write-down Candidates**
SKU | Units | Reason | Original cost | NRV | Write-down $
[rows]
TOTAL WRITE-DOWN: $[X]

**Tab 4 - Freight Allocation**
PO# | SKU | Units | Freight $ | Per-unit allocation
[rows]

**Tab 5 - Reconciliation**
Beginning inventory (Jan 1 prior year): $[X]
+ Purchases (cost basis): $[X]
- COGS: $[X]
- Write-downs: $[X]
= Ending inventory: $[X]  ← must equal Tab 1 total

Worked example

Quality check

• Inventory Valuation Report is dated Jan 1 12:00 AM UTC, not the day you ran it
• Costing method matches prior year (FIFO/LIFO/Weighted Avg)
• Freight is allocated to cost basis, not expensed separately
• Write-downs documented with photo or unfulfillable report screenshot
• Reconciliation Tab 5 ties to Tab 1 within 1%
• All amounts in USD, no marketplace currency mixed in

Common mistakes

• Using Manage Inventory snapshot. It updates live. By March it is useless for Jan 1 ending inventory.
• Expensing freight instead of capitalizing. IRS requires freight in cost basis. Expensing it overstates COGS in year 1 and understates it in year 2.
• Skipping write-downs. Aged and damaged inventory is a real deduction. Most sellers leave $5,000 to $40,000 on the table.
• Switching costing methods. FIFO to Weighted Avg without Form 3115 is a red flag in an audit.
• Mixing marketplace currencies. UK, DE, JP sales must be converted at the appropriate FX rate per settlement, not year-end spot rate.

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