Are you a seller on Amazon? Then you must already know about VAT. VAT is a value-added tax, a type of consumption tax paid by consumers while buying products and services. It has been given different names in different countries. For example, in America, it is popularly known as ‘sales tax,’ and in the U.K., it is termed as ‘Value-added tax’ aka VAT.
Amazon has been taking exceptionally conscious steps to protect sellers using Fulfillment by Amazon from the radar of revenue officers. Due to this, for many years, customers have purchased products online to save tax. That’s why, every year, millions of dollars were getting lost from sales tax. However, Amazon’s never-ending growth drives further efficiency.
To say that Tax for Amazon FBA sellers is more complicated than other retailers won’t be an understatement. We know that understanding Amazon’s FBA sales tax guidelines can raise confusion.
To provide you with a better understanding, we made this comprehensive guide for Amazon FBA sellers who want to learn about collecting and filing sales tax.
Without further ado, let’s dive in.
What is Value Added Tax (VAT)?
Value-added tax, or VAT, is the tax consumers paid when buying goods or services.
The standard rate of VAT in the U.K. is 20%. In 1973, the value-added tax was introduced in the United Kingdom, substituting Purchase Tax, VAT is the third-largest government revenue source, after income tax and National Insurance. It is managed and handled by H.M. Revenue and Customs, essentially through the Value Added Tax Act 1994. It applies to most goods and services bought and sold for use or consumption in Europe, where a Seller is required to register for VAT.
VAT is a general consumption tax on:
1. The supply of goods and specific movements of goods.
2. The collection of services.
3. The importation of goods into a European country in certain particular circumstances.
VAT Services on Amazon is a convenient and economical cheap solution that handles your VAT registration and filing requirements.
We will recommend thoroughly reading the U.K. government’s guide to taxation here to all the Amazon sellers.
How does VAT work?
VAT is an indirect tax because the final consumer supports it. While you pay the VAT tax to the authorities, VAT is a significant purchase price component. Sellers with a VAT number in the European country should display the VAT charged, entailing the VAT rate and number to consumers on invoices, where a VAT invoice is needed. In this manner, the customer understands how much VAT is charged to him on the purchased product.
Does a seller need a VAT number?
If you sell or store products or services in any European country, you may be asked to register for VAT in each country you sell within or sell to. In addition, you will only be authorized to reclaim the VAT you have paid on your purchases and charge VAT on your sales if you are a VAT registered seller.
When does a seller need to register for VAT in the E.U.?
Some of the most common reasons that may prompt a VAT registration requirement are below.
1. Importing goods into the European marketplaces: If you are based outside the E.U. and ship goods to an E.U. country. If you are a seller based in China and want to ship goods from China to a fulfilment centre in any European country.
2. Storing goods in the European marketplaces:
Storing goods includes either you or Amazon or other third parties on your behalf keeping and moving your inventory between Fulfilment Centres in different European countries.
3. This indicates that you are enrolled in the FBA program or Pan-Europe FBA program, which enables Amazon to distribute your goods across European marketplaces that you choose, requiring VAT registration in the respective countries of storage.
4. Selling to E.U. business customers– You sell to business customers based in E.U. countries different from the E.U. country from where the goods are dispatched from.
5. Selling to E.U. consumers from another E.U. country above the ‘Distance Selling Threshold’ – If you deliver goods from an E.U. country to consumers based in other E.U. countries, you may be required to register for VAT where your sales exceed the ‘Distance Selling Threshold’ for those destinations or ‘Deliver to’ countries.
6. Domestic sales by an E.U. established Seller – If your business is based in an E.U. country and sell to customers within that country. Your sales exceed the ‘Domestic Selling Thresholds,’ you may be required to register for VAT in that country.
1. Amazon helps VAT Services on Amazon conveniently and cost-effectively to handle your VAT registration and filing requirements directly from Seller Central. You can use VAT Services on Amazon free for the first year of subscription to manage your VAT Registrations and Filings.
2. Also, you can register on your own. Once you have registered for VAT in a specific country, you can submit an application form to that country’s tax authorities.
How will a seller upload VAT and tax numbers on Amazon Seller Central?
You need to update your VAT registration numbers in Seller Central to ensure that your transactions are taxed correctly, as soon as they have been received. To upload the VAT number on Seller Central, it is necessary to take the following steps:
Step 1: Navigate to the Seller Central Tax Settings landing page and click ‘Add VAT numbers’ on the top of the landing page. Click here.
Step 2: Navigate to the Seller Central VAT registration page and click ‘Add VAT registration number.’
Documents required for registration
Please find below a listing of some of the most common documents required for the VAT registration process.
1. Photo identification document for a legal representative
2. A certificate confirming your business activities
3. Power of attorney
4. Local VAT certificate
5. Company’s Article of Association
6. Bank letter confirming business bank account details
7. Proof of identity for a legal representative
What is a VAT return?
The VAT-registered person is required to file a VAT return for every relevant period. VAT filing is the method of preparing and submitting reports to tax authorities to provide them with information on your transactions in the applicable period and provide them with the amount of VAT you are expected to pay or receive in the case of an overcharge VAT. A VAT return covers information on the VAT managed from clients and VAT paid to suppliers, along with cross-border sales, cross-border acquisitions, imports, and exports.
How to Set up a VAT collection on Amazon?
How to collect Amazon sales tax?
There are two ways to collect VAT which are given below:
All you need to do is to download a report from Amazon. To do this, follow the below-mentioned steps:
Use sales tax automation: Use a sales tax automation solution to create a report. A sales tax automation will connect with shopping carts and marketplaces. In this way, you will not just comprehend all the sales tax you collected from consumers. It will also break down how much sales tax you’ve collected, hence you don’t have to spend time with maps and tax tables.
Taxation is the method where an individual or business functions on behalf of a non-resident company for VAT purposes in the European Tax representatives. As an online Seller, there may be a requirement for bank guarantees and additional fees. These requirements are dependent on the country-specific requirements and the provider of tax services. VAT (Value Added Tax) is a tax added to most products’ and managing VAT for Amazon FBA sellers is complicated. Each country has a different VAT system, and they all work out and collect VAT in different ways.
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