If you are planning to sell products to US customers, you have almost certainly heard of Amazon FBA. FBA stands for Fulfillment by Amazon, and it is one of the most popular ways for new sellers, including Korean entrepreneurs entering the US, to reach millions of shoppers without building their own warehouse and shipping operation. This beginner’s guide explains how the model works, what it costs, and the practical points you need to understand before you send in your first shipment.
How Amazon FBA Works
At its core, Amazon FBA is an outsourced logistics service. Instead of storing products at home or in your own warehouse and shipping each order yourself, you send your inventory to Amazon’s fulfillment centers. From that point, Amazon handles the heavy lifting.
The basic flow looks like this:
- You source or manufacture your products.
- You create listings in your Amazon seller account.
- You ship your inventory to Amazon’s fulfillment centers.
- When a customer places an order, Amazon picks, packs, and ships it.
- Amazon handles most customer service and returns for those orders.
Products fulfilled this way typically become eligible for Amazon’s fast shipping program, which many shoppers filter for and trust. That eligibility can meaningfully increase your sales, because a large share of buyers prefer items that qualify for the fastest delivery.
The Main Benefits of FBA
FBA is popular for good reasons, especially for founders who cannot manage US logistics themselves:
- No warehouse needed. You do not have to rent storage space or set up shipping infrastructure in the US.
- Fast shipping eligibility. Your products can qualify for Amazon’s expedited delivery badge, which builds buyer confidence.
- Outsourced customer service. Amazon manages most inquiries and returns for FBA orders, which is valuable when you are in a different time zone.
- Scalability. As your sales grow, Amazon’s network absorbs the volume, so you are not constrained by your own packing capacity.
For a founder operating from Korea, that last point is significant. Handling US fulfillment from overseas is difficult and slow. FBA effectively gives you a US logistics team without hiring one.
Understanding the Costs
FBA is convenient, but it is not free, and understanding the fees is essential to protecting your margins. Costs generally fall into a few categories:
- Fulfillment fees charged per unit shipped, based mainly on the item’s size and weight.
- Storage fees charged for the space your inventory occupies, which can rise for products that sit too long or during high-demand seasons.
- Selling fees such as referral fees that Amazon takes as a percentage of each sale, which depend on the product category.
- Optional fees for services like labeling, removals, or long-term storage.
These fees vary and change over time, so treat any figure you see as a rough guide rather than a fixed number. Before committing to a product, build a simple profit calculation that includes your product cost, shipping to Amazon, FBA fees, and Amazon’s referral fee. Many beginners underestimate storage and fulfillment fees and are surprised when their expected profit shrinks. Slow-moving inventory is a particular trap, because storage costs accumulate while sales lag.
Tax and Nexus Points Every FBA Seller Should Know
Here is a point that catches many new sellers off guard. When you use FBA, Amazon may store your inventory in fulfillment centers across multiple states, and you often cannot fully control where. Storing inventory in a state can create sales tax nexus there, meaning you may have obligations in states where your goods are physically held.
The relief is that most states now have marketplace facilitator laws, under which Amazon generally collects and remits sales tax on sales made through its platform. That removes much of the direct collection burden for your Amazon sales. Even so, some states may still expect you to register or report because your inventory is present, so do not assume the marketplace rules erase every obligation.
For foreign founders, there are additional considerations. You will typically need a US business entity, an EIN, and often an ITIN or other taxpayer identification to operate smoothly, and you may face US income tax questions depending on how your business is structured. Because these areas interact, it is wise to understand your tax footprint before you scale, rather than after.
Is FBA Right for Your Business?
FBA suits many sellers, but it is not automatically the best fit for everyone. It tends to work well for standardized products with steady demand, reasonable size and weight, and healthy margins that can absorb the fees. It is less attractive for very large, heavy, or slow-selling items where storage and fulfillment costs eat into profit.
Some sellers use a hybrid approach, fulfilling best-sellers through FBA while handling other products themselves or through a third-party logistics provider. As you gain data on which products move quickly, you can refine where FBA delivers the most value. Start with a small, well-researched product line, measure your true costs, and expand what works.
Getting Started the Right Way
To launch on FBA with fewer surprises, a sensible sequence is to set up your US business foundation first, research a product with real demand and workable margins, calculate all-in costs including fees, prepare compliant listings, and send a modest initial shipment to test the market before scaling. Building on a solid legal and tax base from the start keeps your growth from being interrupted by avoidable compliance issues later.
Frequently Asked Questions
Can I use Amazon FBA if I live outside the US?
Yes. Many foreign founders sell through FBA. You will generally need a US business entity, an EIN, a way to receive US payments, and appropriate taxpayer identification, but living abroad does not prevent you from using the service.
Does Amazon collect sales tax for me on FBA sales?
In most states, yes. Marketplace facilitator laws make Amazon responsible for collecting and remitting sales tax on sales through its platform. However, storing inventory in a state can still create obligations, so confirm each state’s rules.
How much does Amazon FBA cost?
It varies. FBA includes fulfillment fees based on size and weight, storage fees, and referral fees that differ by category. Treat published numbers as rough and calculate your specific product’s costs before committing.
This article is general information, not legal or tax advice; please consult a qualified professional for your situation. If you want to launch on Amazon FBA with a solid US business and tax foundation, we are here to help. USdongsan offers a free consultation to guide you through setting up your company and starting on Amazon FBA the right way.
