How Does Amazon Charge VAT on FBA Fees – and How Do Sellers Stay Profitable?
I wanted to open up a discussion around how Amazon applies VAT to FBA fees, and more importantly, how other sellers are managing to stay profitable under this structure.
From what I understand, Amazon charges VAT on top of their FBA fees (rather than including it), which means we’re effectively paying VAT on the storage, fulfilment, and handling charges. This eats into margins significantly — especially when compared to FBM sellers who don’t incur FBA fees or VAT on those services.
It feels like FBA sellers are at a disadvantage:
We're absorbing FBA fees plus 20% VAT on those fees
Then competing on price with FBM sellers who don’t have these extra costs
And yet Amazon seems to favour FBM in the Buy Box at times, despite delivery standards
So my questions are:
- How are people accounting for VAT on FBA fees in their pricing strategies?
- Is anyone successfully reclaiming this VAT through their VAT returns?
- How do you keep competitive when these added costs kill profitability?
- Are there any tools or strategies to mitigate this or shift favourably?
I’d appreciate any input or examples — it feels like we’re doing everything by the book but getting squeezed from all sides.
How Does Amazon Charge VAT on FBA Fees – and How Do Sellers Stay Profitable?
I wanted to open up a discussion around how Amazon applies VAT to FBA fees, and more importantly, how other sellers are managing to stay profitable under this structure.
From what I understand, Amazon charges VAT on top of their FBA fees (rather than including it), which means we’re effectively paying VAT on the storage, fulfilment, and handling charges. This eats into margins significantly — especially when compared to FBM sellers who don’t incur FBA fees or VAT on those services.
It feels like FBA sellers are at a disadvantage:
We're absorbing FBA fees plus 20% VAT on those fees
Then competing on price with FBM sellers who don’t have these extra costs
And yet Amazon seems to favour FBM in the Buy Box at times, despite delivery standards
So my questions are:
- How are people accounting for VAT on FBA fees in their pricing strategies?
- Is anyone successfully reclaiming this VAT through their VAT returns?
- How do you keep competitive when these added costs kill profitability?
- Are there any tools or strategies to mitigate this or shift favourably?
I’d appreciate any input or examples — it feels like we’re doing everything by the book but getting squeezed from all sides.
0 replies
Seller_k2X0L9mVRT0pW
Amazon are legally required to charge Vat by UK government on their fees. - No choice. Not just for FBA - FBM also.
If you become Vat registered you can claim it back although you then have to pay Vat on your sales.
Regarding favouring FBM over FBA for buy box- again they were legally required to make a more level playing field for all their sellers.
Seller_FQHkqHJI5SqTh
Of course Amazon charge VAT on FBA fees; it's a service.
And of course you claim it back through your VAT return just like any other business expense that includes VAT.
So if you're a VAT registered business you're not at a disadvantage.
Seller_ZJhFeE3tNKzfh
The logic with FBA is you should be selling through more at higher volumes.
So while you may be making less per unit - you should be selling more of them
Also, consider if you were selling the same item, in the same volumes via FBM. You'd need staff (which would need national insurance paying on, healthcare, etc), warehousing etc. All these costs to consider that you cover with the FBA fee.
Seller_IC5dxZRZpcM4T
Your statement about VAT for FBM sellers isnt necessarily correct.
Shipping does normally attract VAT unless it is through Royal Mail, which is exempt from VAT.
I can only assume from your language that you have turnover of below the VAT threshold, otherwise you would be claiming your vat back.
If the vat is an issue and you are below the threshold then you can still apply to be vat registered and then you will be able to claim the vat on all valid business expenses, flip side, you will have to start charging and collecting VAT on sales unless the product you sell is 0%, 5% or exempt from VAT.
Seller_76AUwmqvSyRIM
This only applies to some RM services. I would say that "most" services do attract VAT.
Seller_8pu1BcITpOjUp
Hi Kateevate,
are you a UK company? and are you VAT registered? as these will make a difference to how the people on the forum can help advise
Seller_mS10UjVYuuGor
Both FBA and FBM sellers pay VAT on all Amazon services they use.
Assuming you are VAT registered you can reclaim the VAT you pay on your Amazon services on your returns. If not you won't be charging it on your sales.
To really compare FBA vs FBM costs you need to include suitable warehouse rent, service charge, business rates, utilities, staff costs, packaging, insurance, racking, stationary, maintainance, delaps, handling equipment such as forklifts, etc etc etc. The list of costs is endless.
