What Is Amazon FBA and How Does It Work?

In short: Amazon FBA (Fulfillment by Amazon, sometimes shortened to AMZ FBA) is a service that lets sellers store their products in Amazon's fulfillment network. Amazon picks, packs and ships each order and handles customer service and returns. In return, you pay FBA fees for fulfillment, storage and related services on top of your normal Amazon selling fees.

Updated October 2026: We added a comparison of Amazon's product fulfillment options, including Multi-Channel Fulfillment and Amazon Warehousing and Distribution. Earlier this month we added the 2026 FBA fees, prep rules and Pan-European FBA VAT obligations.

What is Amazon FBA?

Amazon FBA is Amazon's product fulfillment service for third-party sellers. You send your stock to Amazon, and Amazon stores it and delivers it to your customers.

It is one of two ways to fulfill orders when you sell on Amazon. You can store and ship products yourself, which is called Fulfillment by Merchant (FBM). Or you can hand that work to Amazon through Fulfillment by Amazon (FBA).

Amazon says its fulfillment network includes hundreds of fulfillment centers worldwide. Sellers ship stock to Amazon's warehouses, and Amazon delivers each order from there.

Many sellers choose FBA because it lets them grow without investing in warehouses and staff. FBA products are also generally eligible for Prime delivery. You can read Amazon's own overview of Amazon FBA.

How does Amazon FBA work?

Amazon FBA works by moving storage, packing, shipping and post-sale support from you to Amazon. You manage the products and listings. Amazon manages the logistics.

1. You list products in Seller Central. Each product has an ASIN, and you mark the offer as "Fulfilled by Amazon".
2. You prepare and ship stock. You prep and label your units, then create a shipment with the Send to Amazon workflow.
3. Amazon receives and stores it. Your inventory is checked in and stored across Amazon's fulfillment network.
4. Amazon picks, packs and ships. When a customer orders, Amazon picks, packs and ships the item, often with Prime delivery.
5. Amazon handles customer service and returns. Amazon answers delivery questions, sends shipping updates and processes returns and refunds.
6. You get paid. Amazon deducts its fees and pays out your balance, usually every 14 days.

As the seller, you are still responsible for your listings, pricing, stock levels and product compliance. You also remain responsible for your tax obligations. Related reading: Amazon's Call-Off Stock Program to End.

How much does Amazon FBA cost?

Amazon FBA costs depend mainly on your product's size, weight, price and how long it sits in storage. FBA fees are charged on top of your selling plan and referral fees.

In the US, the Professional selling plan costs $39.99 per month, or you pay $0.99 per item sold on the Individual plan. Referral fees are a percentage of the sale price, commonly 8% to 15%, depending on the category. The main FBA fees are set out below.

What changed in the 2026 FBA fees?

Amazon updated its US FBA fees from 15 January 2026. Key changes included:

• A small average increase in fulfillment fees, with a larger discount for low-price products under $10.
• Larger items now billed on the greater of dimensional weight or unit weight.
• The low-inventory-level fee now calculated per seller SKU (FNSKU) and extended to small and large bulky items, with grocery and slow-moving items exempt.
• Higher aged inventory surcharges for stock held over 12 months, plus a new tier for stock held over 15 months.
• A returns processing fee that applies only to products whose return rate exceeds the category threshold.

Base monthly storage fees and referral fees were left unchanged. Fee tables change often, so always check the current rate card and the FBA Revenue Calculator in Seller Central before you price a product.

How can you keep FBA fees down?

• Send stock in quantities that match demand, so you avoid both storage costs and the low-inventory-level fee.
• Check inventory age reports monthly and remove or discount slow sellers before surcharges grow.
• Reduce packaging size and weight, as both affect the size tier and fulfillment fee.
• Plan Q4 stock carefully, because October to December storage rates are higher.

What is the difference between FBA and FBM?

The difference is who fulfills the order. With FBA, Amazon stores and ships your products. With FBM, you store, pack and ship them yourself or through your own logistics partner.

Many sellers use both. They send fast sellers to FBA and fulfill bulky or slow-moving items through FBM.

What other Amazon product fulfillment options are there?

Besides FBA and FBM, Amazon offers services that use the same stock for other channels or hold extra stock in bulk. The main options are compared below.

Each option has its own fees, so compare them in Seller Central. Wherever the stock sits, the tax rules follow the location of the goods, as explained in the VAT section below.

Which products are eligible for Amazon FBA?

Most products can use FBA, but some are restricted or banned. Before you send stock, check that your products meet Amazon's eligibility and prep rules.

• Restricted products: some items cannot be sold on Amazon at all, and some need category approval first.
• FBA product restrictions: certain goods, such as some hazardous materials (dangerous goods), have extra review steps or cannot be stored in FBA.
• Expiration-dated products: food, cosmetics and similar items must meet minimum shelf-life rules.

What are the prep and labeling requirements?

You must prepare, pack and label your units to Amazon's standards before shipping them. Stock that does not meet the rules can be refused, repackaged for a fee or flagged as an inbound defect.

• Each unit needs a scannable barcode. This is either an Amazon FNSKU label or, where allowed, the manufacturer barcode.
• Fragile, liquid, sharp or loose items need prep such as bagging, bubble wrap or boxing.
• Boxes must meet Amazon's size, weight and labeling rules.

One US change in 2026 matters here. Amazon stopped offering its FBA prep and item labeling services for US shipments from 1 January 2026, so you or a prep center must do this work. Check the current labeling rules in Seller Central, as they depend on whether you are the brand owner.

How do you start selling with Amazon FBA?

You can start with FBA in a few steps from your Seller Central account.

1. Create a seller account. Choose the Individual or Professional plan and complete identity and tax verification.
2. Research your product and costs. Use the FBA Revenue Calculator to estimate fees and margin before you buy stock.
3. Check eligibility. Make sure your products are not restricted and meet FBA rules.
4. Create your listings. Match an existing Amazon ASIN or create a new one, and set fulfillment to FBA.
5. Prep and label your stock. Follow Amazon's packaging and barcode rules, or use a third-party prep center.
6. Send your first shipment. Use the Send to Amazon workflow to choose your shipment splits, print labels and book the carrier.
7. Monitor and restock. Use the FBA Dashboard and restock tools to keep enough supply without overstocking.
8. Sort out your tax registrations. Storing stock in a new country or state can create VAT or sales tax obligations, as explained below.

What is Pan-European FBA?

Pan-European FBA is Amazon's program for storing your inventory across several EU countries. Amazon moves your stock between its European fulfillment centers so it sits close to customers.

To join, you enable storage in at least two eligible EU countries. Amazon lists France, Germany, Italy, Spain and Poland as storage options. Your products must also be listed in the required EU stores. From 3 September 2026, every Pan-European FBA product needs an active Netherlands offer. From 26 February 2027, an active Belgium offer will also be required.

In return, you pay local fulfillment fees for orders in countries where storage is enabled, which are usually lower than cross-border fees. The UK has not been part of Pan-European FBA since 1 January 2021.

Do you need VAT registration for Pan-European FBA?

Yes. You need a VAT number in every EU country where Amazon stores your goods. Storing stock in a country, and moving your own goods between countries, creates VAT obligations there.

• Stock transfers: moving your own goods from one EU country to another is treated as a taxable transfer. It must be reported in both countries.
• Local sales: sales shipped from a warehouse to a customer in the same country are domestic sales. You report them on that country's VAT return, not through the One-Stop Shop (OSS).
• Cross-border sales: B2C sales shipped to another EU country can be reported through the OSS. The EUR 10,000 EU-wide threshold only applies to sellers established in a single EU country.
• Non-EU sellers: if you are established outside the EU, Amazon is usually treated as the deemed supplier for B2C sales of goods already stored in the EU. You still need VAT numbers for stock storage and transfers.

Amazon notes you can start Pan-European FBA with just two VAT numbers, but each new storage country adds another registration and set of returns. Our Amazon FBA VAT guide for Europe covers this in detail, and our EU VAT, OSS and IOSS guide explains distance selling rules. Taxually's CrossTax handles VAT registrations and filings in multiple countries.

Does FBA inventory create US sales tax obligations?

It can. Storing inventory in a US state's fulfillment center can create physical nexus in that state. Amazon collects sales tax on most marketplace sales under marketplace facilitator laws, but you may still have registration or filing duties. See our guides on economic nexus by state and US sales tax for foreign sellers, or learn how LumaTax manages US sales tax.

Is Amazon FBA worth it?

Amazon FBA can be worth it, but it has both benefits and downsides for ecommerce businesses. Here are the main pros and cons to weigh.

What are the advantages of Amazon FBA?

• Amazon's reputation: buyers trust Amazon's delivery and returns, and that trust extends to your FBA offers.
• Prime delivery: FBA products are generally eligible for fast Prime shipping, which many shoppers filter for.
• Shipping rates: fulfillment fees include shipping, often at rates that are hard for small sellers to match.
• Lower overheads: you don't need your own warehouse, packing staff or carrier contracts.
• Customer service and returns: Amazon handles delivery questions, returns and refunds for FBA orders.
• Time saved: you can spend your time on sourcing, listings and marketing instead of packing orders.
• Multi-channel options: you can use the same stock to fulfill orders from other sales channels through Amazon Multi-Channel Fulfillment.

What are the disadvantages of Amazon FBA?

• Fees add up: fulfillment, storage, aged inventory and low-inventory-level fees can erode margins, especially on slow sellers.
• Strict prep rules: stock that doesn't meet Amazon's prep and labeling rules can be refused or charged extra fees.
• Limited branding: orders usually ship in Amazon packaging, which makes it harder to build brand awareness.
• Less control: you depend on Amazon's capacity limits, policies and fee changes.
• More returns: Amazon makes returns easy, so return rates can be higher. High return rates may also trigger returns processing fees.
• Tax complexity: stock stored in several countries or states can create VAT and sales tax registration duties.

Is Amazon FBA right for me?

Amazon FBA is a good fit if most of your sales come through Amazon and your products sell steadily. It removes the daily work of fulfilling orders, handling returns and dealing with delivery questions.

It is a weaker fit for bulky, slow-moving or highly customized products, where storage and fulfillment fees can outweigh the benefits. Run the numbers with the Revenue Calculator, check your tax obligations, and test a small shipment before committing your full range.

Do you need help with your VAT or sales tax compliance? Book a free call with one of our tax experts to find bespoke solutions for your business, optimize your tax costs, and reach millions of new potential customers.

Sources

• Amazon – Fulfillment by Amazon (FBA) overview and costs
• Amazon – Selling plans and referral fees
• Amazon – Pan-European FBA
• Amazon – Multi-Channel Fulfillment
• Amazon – Amazon Warehousing and Distribution (AWD)
• Supply Chain Dive – Amazon ends US FBA prep and item labeling services
• European Commission – VAT One-Stop Shop (OSS)
• European Commission – VAT e-commerce rules

How Taxually handles this

Taxually’s CrossTax handles VAT registration, VAT, OSS and IOSS returns and fiscal representation in the countries you sell into, and checks your sales data against 250+ validation rules before each filing. OneTax then pays every tax authority with one bulk payment in your chosen currency.

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