Edit: Accidentally deleted my entire post when trying to add in the below FAQ. Please stand by while I try to recover it.
2nd edit: Is there any way to recover previous versions of my post? I spent about 20 minutes typing up the whole thing and haven't slept, not in the mood to re-type it right now. If a mod can restore previous edits, the one right before I pasted the FAQ about the calculation of product values is what I am looking for.
3rd edit: I don't have the wherewithal to do it myself, after I asked ChatGPT how to go through my local cache to find my previous version and I was unsuccessful it offered to re-write the post for me. Not something I'm usually a fan of but here it is:
I’m trying to understand the correct way to treat Amazon Vine product value for tax purposes, and I’d appreciate insight from the TurboTax Experts. Amazon Vine reviewers receive products in exchange for writing reviews, and compensation is reported on Form 1099-NEC as “ETV” (Estimated Taxable Value). ETV is usually based on the product’s retail value, but in practice it varies widely depending on the item’s category and the seller. Many consumables (such as food, household cleaners, supplements, pet food, etc.) show 0 ETV when sold by Amazon Retail, but the exact same types of items may have non-zero ETV when sold by a third-party seller — and sometimes third-party seller items also show 0 ETV. In other words, the 0-ETV assignment is not purely tied to brand, price, or seller, but appears to follow internal category rules that Amazon applies, presumably based on IRS guidance about how certain goods should be valued for tax purposes.
Vine also requires reviewers to use the items in order to create the review, and we are prohibited from transferring possession of the items for 6 months. After 6 months, we may sell, gift, or donate them, but only after they’ve already been used to produce the review. Because of these requirements, the items serve both as the compensation for the work and the materials needed to perform it. And importantly, most Vine items are household goods — a category for which the IRS has consistently stated that fair market value drops significantly after use. IRS guidance in multiple contexts (including charitable donation valuation and FMV determination rules) makes clear that used household goods generally have a substantially lower value than their retail price unless they are collectibles or specialty items. Since Vine requires us to use the goods before we may transfer them, the post-use value is often minimal.
This has led some Vine reviewers to discuss an informal method sometimes referred to as the “50/20/0 method” for determining the business-use portion of these items: 50% deduction for brand-name goods 80% deduction for generic/off-brand goods 100% deduction for consumables.
The idea is that these percentages represent the portion of the item that is effectively used up or consumed in performing the review work, especially given Amazon’s own practice of assigning 0 ETV to many consumable categories and the IRS’s position that used household goods experience steep FMV reduction. Some reviewers have mentioned that this method was informally reviewed by a few tax professionals, including an IRS EA, but it’s not official IRS guidance.
Regardless of the deduction method, we would still report 100% of the 1099-NEC ETV on Schedule C, Line 1, since that is the income Amazon reports. Any deductions would appropriately be listed on Schedule C, Line 21a (Other Expenses) with proper descriptions.
My questions for the TurboTax Experts are:
Does the 50/20/0 method have any legitimate tax basis for determining the deductible business-use portion of Vine items, given the required use of the items and the IRS’s stance that used household goods lose substantial FMV?
Does Amazon’s practice of assigning 0 ETV to many consumables — including some items from third-party sellers — indicate that certain categories of goods may reasonably be viewed as “consumed in service” of producing the review rather than as compensation with lasting value?
If the 50/20/0 method is not appropriate, is there an IRS-supported framework for determining what portion (if any) of Vine items can be deducted as ordinary and necessary expenses related to operating a Vine reviewing activity?
Thank you for any clarification or guidance.
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When I was editing and accidentally deleted the entire post, I was trying to add this FAQ from Amazon about how ETV is calculated:
How are product values calculated?
The fair market value (FMV) is calculated based on a variety of factors, including information provided by the manufacturer. The current price is only one of the components taken into account when calculating the FMV of an item which may be different from the current price listed on Amazon.com. There are certain categories were we have a set FMV. For example, third-party household goods such as grocery, beauty, and pet foods will be generally valued at $0. Books, including Advanced Reader Copies, will be valued at 99 cents. We cannot make adjustments to this value; please know that if you order this item you will be responsible for paying taxes associated with the FMV shown.
