Vat on amazon sales
Hello everyone,
We are confused on how our VAT bill should be calculated. At the moment our accountant is using the amazon fees as an expense and not a cost of business. This means that our VAT bill is very high, pretty much equivalent to our margins. We end up breaking even at the end of the quarter. It seems wrong to us we are selling alongside other people, who sometimes sell cheaper than us on the same product, so are wondering how are they are making profit.
For example -
We do £50000 sale
Approx 23% fees - £11500
According to our accountant we have to also pay 20% VAT on the fees on top of this.
This then makes the fees add up to roughly 28% of our sale.
Is this right? Please let us know.
EDIT - We are VAT registered.
Vat on amazon sales
Hello everyone,
We are confused on how our VAT bill should be calculated. At the moment our accountant is using the amazon fees as an expense and not a cost of business. This means that our VAT bill is very high, pretty much equivalent to our margins. We end up breaking even at the end of the quarter. It seems wrong to us we are selling alongside other people, who sometimes sell cheaper than us on the same product, so are wondering how are they are making profit.
For example -
We do £50000 sale
Approx 23% fees - £11500
According to our accountant we have to also pay 20% VAT on the fees on top of this.
This then makes the fees add up to roughly 28% of our sale.
Is this right? Please let us know.
EDIT - We are VAT registered.
0 replies
Seller_aOogeQQcgrYam
23% seems very high to me, but it depends on the categories that you are selling in. All my goods are at either 7% or 12%. Best input your ASINs at https://sellercentral.amazon.co.uk/hz/fba/profitabilitycalculator/index?lang=en_GB to confirm the fees you are paying.
The fees are a percentage of the total retail cost, so will include VAT. i.e. an item that costs £100+VAT will retail at £120, with (say) 12% going to Amazon in fees. So we earn £105.60 (£120-12%), of which £88 is ours and £17.60 goes to the taxman as VAT.
You then need to deduct your cost of sales, shipping, insurance etc. Obviously FBM and FBA will have different cost structures - the calculator can help with that.
As to how others sell more cheaply - they’re either doing massive volume, have means to acquire the goods more cheaply (e.g. via liquidations or as imports) or are simply making a loss.
Seller_qZO3ZCjoBXEeL
If you are VAT registered then you should have your VAT number registered with Amazon. Once it is registered they will zero the VAT on the fees as it is an intra EU supply.
Regardless it is an input VAT charge, meaning that if you are on regular accounting you can reclaim the VAT when you file your account (or in practice you are offsetting it against your output VAT liability on goods sold) You cannot do this if you are on the Flat Rate scheme however.
Seller_3U9WdViGssMN6
To put it simply,
We buy an item for £10
We sell it for £15
The accountant says we made a profit of £5 so you must pay vat on that
We say we made a profit of £3 because we also paid £2 fees. So we should pay VAT on the £3.
Seller_hXSUjSvnUJXBE
As far as I understand it your accountant is calculating on reverse charge there, usually used when selling on used items that HMRC have allowed such as used cars and mobile phones. If you’re on a standard VAT scheme the way your accountant is doing it is not correct.
Seller_3U9WdViGssMN6
I have sent our accounts to another accountant and they have also stated that the vat bill is wrong. They said our accountant uses an excel spreadsheet which is easy to make errors on. If this is true then we have been paying the wrong VAT for almost 3 years.
Seller_3ZwwzlGK5UIeQ
When you mention fees that could mean a lot, for the referral fee Amazon will take the % of the full sale price (inclusive of VAT) e.g. for easy numbers lets say you sold something for £12, £10 is money you will be paid (before fees) and £2 is the VAT. Amazon will charge you the percentage of £12 not the £10 even though the £2 is VAT, unfair? probably but thats the way they do it.
As for accounting for fees - they fall into different categories and they may have different VAT rates, for example FBA/Referral fees are invoiced from Luxemburg, so they are reverse charged (https://www.avalara.com/vatlive/en/eu-vat-rules/eu-vat-returns/reverse-charge-on-eu-vat.html), whilst Sponsored Ads (for amazon.co.uk) are Vatable (e.g. you pay the VAT and can claim for it).
All of this is broken down on the settlements you receive by Amazon but can be notoriously difficult to understand. Also from experience, a LOT of accountants really do not understand how accounting and Amazon work, especially because of the way they invoice from Luxembourg and it gets worst if you are on Pan-EU.
Whilst I might be a bit biased (as I work for who I’m about to recommend) - you might want to checkout https://linkmybooks.com, built by a couple of 7 figure UK Amazon sellers who actually understand how it all fits together.
Seller_eWzMQwj2dBZv5
This is all confusing because of the phrase “VAT on Amazon Seller Fees.”
Here is the overview: I sell an item for £120. Since it’s VAT-inclusive, £20 of that is VAT, which I pay.
However, Amazon charges me commission on the whole sum, in my case, 17% or £20.4. Here is the tricky part: I am paying VAT on Amazon’s commission. However, since they are getting that money from me, as I understand it, they are ALSO paying VAT on it. So, HMRC is receiving that VAT tax twice.
With that in mind, I filed to reclaim the VAT I had paid on my Amazon Seller fees for the years 2015-2017. I did this with an HMRC form 652 (You can google it). I stated clearly what I was doing. In return, I received a refund for the entire amount: more than £6000. Interesting, eh?
Now it gets more interesting. After Amazon talked me into going Pan-EU with empty promises of tax compliance help (they did make good about 18 months late) I noticed that my new provider, an Amazon partner, was paying VAT tax on the gross sales, without removing Amazon Seller Fees. Multiply this by every marketplace, and you soon see that it’s quite a bit of money. In a conference with their manager, he told me clearly that VAT is paid on the gross sales amount, without accounting for commissions or shipping. So, I’ve been doing it like that the past year, but am still not convinced, since that
Seller_eWzMQwj2dBZv5
since that £6300 refund was not a hallucination. Can anyone else weigh in on this?
Thanks!
Seller_eWzMQwj2dBZv5
Peter,
Thank you for reply. VATGlobal is my service provider and I have discussed this with them without being completely satisfied. Here is the crux of the dilemma:
When sell items, Amazon charges me a 17% commission. In fact, I never get paid that money: Amazon keeps it, as we all know. However, I AM paying VAT on the total amount of the sale, INCLUDING Amazon’s commission.
It seems to me that Amazon will also pay VAT on the commission they are charging me. In that case, I should be claiming Amazon’s commissions AGAINST my declared sales, because Amazon is, I presume, paying VAT on the commissions it charges me. That the logic I used when I filed a form 652 in the UK and got a substantial refund.
VATGlobal told me that since Amazon is not charging me VAT on the commissions it charges me, I have nothing to declare. Also, I was told (if I recall correctly) that Amazon has it worked out so that they don’t pay VAT on the commissions they collect, and so I have to be responsible for it.
This is the heart of the dilemma for me. Because, otherwise, I am truly paying VAT on Amazon’s income.
Please let me know if you have any insight into this. Thanks for your attention.
