VAT on Amazon Fees
Now that there is no VAT on Amazon fees (which know has been a very long time ) my VAT bills are massive every month, I dont seem to be making any money now. After amazon take 30-35% of my sales, restocking and then paying the VAT man, I am literally left with nothing, what am I doing wrong> surely you are in the same boat? Or similar? Or are there that many people just not paying their taxes>> Asking for friend…
VAT on Amazon Fees
Now that there is no VAT on Amazon fees (which know has been a very long time ) my VAT bills are massive every month, I dont seem to be making any money now. After amazon take 30-35% of my sales, restocking and then paying the VAT man, I am literally left with nothing, what am I doing wrong> surely you are in the same boat? Or similar? Or are there that many people just not paying their taxes>> Asking for friend…
33 replies
Seller_esvgLzKXw2YAl
Raise your prices?
No point in selling lots, if it’s barely making any money at all. That is literally just churning for the sake of it.
It’s possibly the biggest single mistake that new sellers make.
And just in case, just because there is no actual VAT on the invoices, you still need to account for it as though it was. Otherwise you will paying incorrect amounts of VAT.
Seller_Rkf2znCXtSZpI
From the amount of the fees you quoted I assume you sell FBA.
My Amazon fees are 15% (in reality a little over this to account for fees on returns) and my postage (not FBA) is 20% so your quote of 35% amazon fees seems right (if your FBA)
Not sure how many items you sell but you should create a P&L for every item and do everything Net of VAT to keep it clean.
Seller_zbbK8Mjvimn1O
Why don’t you visit the link in news on Amazon from yesterday with the title
Visit our new pages dedicated to VAT Education
Download the VAT Handbook and read every word of it to fully grasp it.
In our experience and opinion; most accountants out there know very little/nothing about how VAT works for Amazon Sellers until and unless they have been doing it for a while.
So, we had to educate 3 accountants on everything about it and leaving one after another when we noticed they could not grasp it properly.
VAT with Amazon is easy peasy to work out. The only condition is that the accountant needs to understand the details.
As for the profits; well yeah - VAT hurts every business especially the small ones. Just raise your prices accordingly is the only way forward.
Regards,
Tom.
Seller_tRuvBEHDedp4q
I’m assuming your accountant has worked out gross sales and gross amazon fees then told you that amazon are taking 30% of your gross sales?
That may be correct. Amazon basic fees depend on category. It is usually 15% but can be higher in some categories. However, if you are doing FBA then you have the FBA fees and storage fees. Then there are your Amazon subs etc. If you add all the fees up it may well add up to 30% of your gross sales.
From what I understand is you are adding 30% for fees and 20% for VAT - but as the price increases so does the fees and VAT element. You can’t work out prices like that. For example, I do not use FBA so I know my fees (ignoring subs) are 15%. If I just added 15% and then 20% for VAT it would not be correct. I have to increase my basic cost by approx 50% to break even.
For example, if I wanted to sell something at £10 - I need to list it at £15. Selling at £15 there would be £2.50 in VAT and £2.25 In Amazon fees which leaves me £10.25 - 25p more than I wanted.
If I took £10 and added 15% to account for fees and then 20% for VAT I would have a selling price of £13.80. But this gives me VAT of £2.30, Amazon fees £2.07 leaving me with £9.43 - 57p less than what I wanted.
Personally I would use the Amazon fees of 30% as a guide only - work out the actual fees per item and price accordingly. FBA fees vary depending on weight of item so the fees are a higher percentage on heavier items. Also storage fees depends on size of item. If you have a general 30% rule you may find that you are pricing the small light items too high (and not getting sales) and the large heavy items too cheap (and losing money on them).
Amazon VAT on fees can be disregarded. When you do a VAT return you account for the fees under the Reverse Charge scheme. Basically if Amazon fees were £100 you would add £20 (to account for the VAT) under both the VAT Paid and VAT Reclaimed boxes (so they cancel each other out). Any good accountant or software would do this for you (as long as the invoice is coded correctly)
Seller_tRuvBEHDedp4q
So you selling at £13.95
You lose £2.09 Amazon fee, £2.44 FBA fee, £2.33 VAT
That leaves you with £7.09
Then you have the cost of sending into FBA (I think when I was using FBA it was an average of 60p per item), now leaving £6.49
Then monthly storage fees at Amazon (using sizes provided that would be 11p if clothing, 18p other categories during months Jan-Sep rising to 18p and 26p in Oct-Dec) per item so if clothing and it takes a month to sell you now have £6.38 left
If very slow moving beware of additional long term storage fees which come into effect after a year so best to only send in enough items that will sell within a few months at most.
So with the £6.38 you have left you have to buy the stock, pay for office stationery, any other fixed fees (Amazon subs etc) and what is left is your profit on which you will pay income tax.
