Canadian Amazon Sellers: Year End Inventory Report

Canadian Amazon sellers must calculate their year-end inventory value to accurately report their Cost of Goods Sold (COGS) on their tax return. According to CRA guidelines, businesses cannot simply deduct all product purchases as expenses — unsold inventory at year-end must be excluded from the current year’s expenses and carried forward. The basic formula is: Starting Inventory + Purchases – Ending Inventory = Cost of Goods Sold.

Last updated: March 2025

Why Year-End Inventory Matters for Taxes

Many Amazon sellers make the mistake of deducting every product purchase as an expense in the year it was bought. This overstates expenses and understates income, which can trigger a CRA reassessment with penalties and interest.

Example: You start the year with $0 in inventory, purchase $50,000 worth of products, and have $12,000 worth of unsold inventory in Amazon FBA warehouses on December 31.

Incorrect: Claiming $50,000 as expenses (deducting everything you bought)
Correct: Claiming $38,000 as COGS ($0 + $50,000 – $12,000)

That $12,000 difference could mean $3,000 to $6,000 in extra taxes if CRA catches the error and reassesses.

The Cost of Goods Sold Formula

COGS = Opening Inventory + Purchases During the Year – Closing Inventory

How to Pull Your Year-End Inventory Report from Amazon

Step-by-Step: Monthly Inventory History Report

Log into Seller Central
Navigate to Reports → Fulfillment
Under Inventory on the left sidebar, click “Show More”
Select “Monthly Inventory History”
Click Download and set the date range to your fiscal year-end month (e.g., December 2024 to December 2024 for calendar year-end businesses)
The report downloads as a .txt file — open it in Excel using the Text Import Wizard (delimited by tabs)

Alternative: Inventory Snapshot Report

You can also use the Manage FBA Inventory report:

Go to Reports → Fulfillment → Inventory
Select “Manage FBA Inventory”
Download on the last day of your fiscal year (or as close to it as possible)

This gives you a snapshot of every ASIN in your FBA inventory with the quantity on hand.

Calculating the Value of Your Inventory

The report from Amazon shows you what products you have and how many units, but it does not show your cost. You need to add the cost yourself.

Method 1: Specific Identification (Recommended for Most Sellers)

Match each product to its actual purchase cost. This is the most accurate method and what CRA expects for most small businesses.

Add a column called “Unit Cost” to your inventory spreadsheet
Enter the cost you paid per unit for each product (what you paid the supplier, not the selling price)
Include landed costs if significant: shipping to Amazon, customs duties, prep fees
Multiply Unit Cost x Quantity on Hand for each product
Sum the total — this is your closing inventory value

Method 2: Weighted Average Cost

If you buy the same product at different prices throughout the year, use the weighted average:

Average Cost = Total Cost of All Units Purchased / Total Units Purchased

This is acceptable to CRA and simpler if you source the same products repeatedly at varying prices.

What Costs to Include in Inventory Valuation

According to CRA, inventory should be valued at the lower of cost or fair market value. Cost includes:

Purchase price of the product
Shipping costs to get the product to Amazon (inbound shipping)
Customs duties and brokerage fees (for imported products)
Prep and labeling costs (if you pay a prep center)

Do NOT include in inventory cost:

Amazon FBA storage fees (these are period expenses, deducted when incurred)
Amazon referral fees or FBA fulfillment fees
Advertising costs
Your own time or labor

Do Not Forget Inventory Outside Amazon

Your year-end inventory is not just what is in Amazon warehouses. Include:

Products at home or in your own warehouse waiting to be shipped to Amazon
Products at a prep center being prepared for FBA
Products in transit to Amazon (if you have paid for them)
Products in Amazon “Unfulfillable” status or pending removal
Inventory on other platforms (eBay, Walmart, Shopify) if applicable

What If Products Are Damaged or Unsellable?

If inventory has declined in value below what you paid (damaged, obsolete, or market price dropped), CRA allows you to value it at the lower of cost or fair market value. This means:

Products you paid $20 for but can only sell for $5 should be valued at $5
Products that are completely unsellable can be written off to $0 (document the reason)
Keep records of any write-downs for CRA documentation

Frequently Asked Questions

How do I calculate year-end inventory for Amazon FBA in Canada?

Download the Monthly Inventory History report from Seller Central (Reports → Fulfillment → Inventory → Monthly Inventory History) for your fiscal year-end month. Add a cost column for each product, multiply cost by quantity, and sum the total. This is your closing inventory value for tax purposes.

Do I need to count inventory stored at home separately from Amazon FBA?

Yes. Your total year-end inventory includes all unsold products regardless of location — Amazon FBA warehouses, your home, prep centers, and in transit. CRA expects you to report the total value of all inventory owned by your business.

What happens if I do not report year-end inventory on my tax return?

CRA may reassess your return and add the inventory value back to your income, resulting in additional taxes owing plus interest and potential penalties. Inventory valuation is a common CRA audit item for e-commerce businesses.

Need Help With Year-End Inventory and Tax Filing?

Getting your inventory valuation right is critical for accurate tax filing. If you are a Canadian Amazon seller and need help with year-end bookkeeping, inventory calculations, or tax preparation, contact us. We specialize in accounting for Canadian Amazon sellers and know exactly how to handle FBA inventory for tax purposes.