VAT confusions; How to calculate profit margins when you don't know the exact VAT for your products?
Hello Seller,
I hope you all are doing fine. I have so much confusion regarding VAT. I am trying to comprehend like how this VAT system works.
Normally I calculate the profit like this;
Profit = Sale Price - Cost of Product inc VAT - Amz Fee(Ref fee, Storage costs, Fulfilment cost)
Now the confusion is that Amz also deducts an estimated VAT on each sale which is around 16.67% according to Revneue Calculator. But I have beed told that this VAT is not correct, I have to use some tools to know the VAT on my sales i.e Buybotpro. Now the buybotpro doesn't show the consistent value of VAT, sometime it's 6% or 7% or 5% So you can never know how much VAT you are paying on your sales. How you guys hunt a profitable products for a wholesale business model if you are non VAT registered business. For big seller this VAT is not a problem I guess because they don't consider this sales VAT as they reclaim it back.
Let me know if I am missing something and how should I approach this. Thank You all.
8 replies
Seller_QuM1AZgzfU9x4
If you aren't VAT registered and are based in the UK then there is no VAT on your sales. Amazon just show it whether you pay it or not.
You will though have to add VAT to Amazon's fees as the revenue calculator doesn't show that.
Seller_mS10UjVYuuGor
16.67% of the gross (total) sale price is another way of looking at nett sales price plus 20% so is correct but only relevant if you're VAT registered therefore collecting and paying it. If you're not VAT registered you won't be charging VAT on your sales but at the same time won't be able to reclaim VAT paid on your inputs of stock and fees.
Having glanced at BuyBotPro is appears to be mainly an arbitrage tool who are just dipping their toe into wholesale so there maybe better tools available to those seeking a wholesale business model. Regarding the conflicting VAT rates, at a guess either BuyBotPro is showing the difference in VAT if you were to buy/sell to/from different countries who have different rates of VAT or maybe its just poorly configured.
Seller_ae51e0CJoHqCX
If you are non VAT registered business then the VAT aspect of this becomes irrelevant. Using the calculators or these other tools that factor the VAT in are not really helpful unless you are VAT registered and even then I prefer to work it our for myself.
The fees on Amazon now show the VAT separate so since you cannot reclaim it, you now have to factor this in as is an added deduction. There are 2 things that have changed recently with the calculations and charges which is the digital tax and the VAT on fees. This digital tax has been split out from the fee so is still non reclaimable (which I daresay is why Amazon done this) the VAT is still not reclaimable for non VAT businesses so is an additional deduction to your calculation.
So in effect your calculation still applies ie Profit = Sale price - cost of product in VAT - Amz fee (ref fee inc VAT, storage costs, fulfilment cost)
The actual profit will be less now than it was before as you quite rightly observed that large seller will be able to claim this additional tax back whereas non VAT registered business cannot.
Depending on your previous profit margins, i worked out that a non registered business would have to up the prices by around 3-5 percent in order to maintain the same net profit as before assuming the rates on all other variable were the same.
Seller_JkJ5Wu8mvvXN6
sales price minus
vat, referral fee, vat on referral fee, DST, Product
Seller_HVM1ultABtfiS
As far as I know if you are selling inside the UK and your company is also based in the UK and you are VAT registered, in this scenario amazon just calculate your VAT and do not deduct it from your sales made on amazon, you or your accountant have to separately file the VAT returns on quarterly basis.
After filing VAT returns for a couple of quarter you will know your incremental rate which you should factor in pricing your products.
Seller_51Trj4jpVFZCy
for VAT Calculation let me make it easy for you with an example. Lets assume you buy a product for £120 and sell for £240 inc VAT.
Lets assume Amazon Fees and shipping etc are £24 inc VAT for this example
Profit calculation will be as following
£240/1.2= £200 Ex VAT Sale
£120/1.2=£100 Ex VAT Cost
£24/1.2=£20 Amazon Fees
Your Total Profit will be
200-100-20=80
Total VAT you will pay for this sale to HMRC basically £40-£20-£4= £16 (Since you paid £20 when you purchase your product and £4 to Amazon when you get the service)
Also for big or small company no difference on VAT Actually sellers not really paying VAT. Only buyers are paying. on that example buyer paid £40 VAT in total you also paid £40 VAT to HMRC.
VAT confusions; How to calculate profit margins when you don't know the exact VAT for your products?
Hello Seller,
I hope you all are doing fine. I have so much confusion regarding VAT. I am trying to comprehend like how this VAT system works.
Normally I calculate the profit like this;
Profit = Sale Price - Cost of Product inc VAT - Amz Fee(Ref fee, Storage costs, Fulfilment cost)
Now the confusion is that Amz also deducts an estimated VAT on each sale which is around 16.67% according to Revneue Calculator. But I have beed told that this VAT is not correct, I have to use some tools to know the VAT on my sales i.e Buybotpro. Now the buybotpro doesn't show the consistent value of VAT, sometime it's 6% or 7% or 5% So you can never know how much VAT you are paying on your sales. How you guys hunt a profitable products for a wholesale business model if you are non VAT registered business. For big seller this VAT is not a problem I guess because they don't consider this sales VAT as they reclaim it back.
Let me know if I am missing something and how should I approach this. Thank You all.
VAT confusions; How to calculate profit margins when you don't know the exact VAT for your products?
Hello Seller,
I hope you all are doing fine. I have so much confusion regarding VAT. I am trying to comprehend like how this VAT system works.
Normally I calculate the profit like this;
Profit = Sale Price - Cost of Product inc VAT - Amz Fee(Ref fee, Storage costs, Fulfilment cost)
Now the confusion is that Amz also deducts an estimated VAT on each sale which is around 16.67% according to Revneue Calculator. But I have beed told that this VAT is not correct, I have to use some tools to know the VAT on my sales i.e Buybotpro. Now the buybotpro doesn't show the consistent value of VAT, sometime it's 6% or 7% or 5% So you can never know how much VAT you are paying on your sales. How you guys hunt a profitable products for a wholesale business model if you are non VAT registered business. For big seller this VAT is not a problem I guess because they don't consider this sales VAT as they reclaim it back.
Let me know if I am missing something and how should I approach this. Thank You all.
8 replies
8 replies
Seller_QuM1AZgzfU9x4
If you aren't VAT registered and are based in the UK then there is no VAT on your sales. Amazon just show it whether you pay it or not.
You will though have to add VAT to Amazon's fees as the revenue calculator doesn't show that.
Seller_mS10UjVYuuGor
16.67% of the gross (total) sale price is another way of looking at nett sales price plus 20% so is correct but only relevant if you're VAT registered therefore collecting and paying it. If you're not VAT registered you won't be charging VAT on your sales but at the same time won't be able to reclaim VAT paid on your inputs of stock and fees.
Having glanced at BuyBotPro is appears to be mainly an arbitrage tool who are just dipping their toe into wholesale so there maybe better tools available to those seeking a wholesale business model. Regarding the conflicting VAT rates, at a guess either BuyBotPro is showing the difference in VAT if you were to buy/sell to/from different countries who have different rates of VAT or maybe its just poorly configured.
Seller_ae51e0CJoHqCX
If you are non VAT registered business then the VAT aspect of this becomes irrelevant. Using the calculators or these other tools that factor the VAT in are not really helpful unless you are VAT registered and even then I prefer to work it our for myself.
The fees on Amazon now show the VAT separate so since you cannot reclaim it, you now have to factor this in as is an added deduction. There are 2 things that have changed recently with the calculations and charges which is the digital tax and the VAT on fees. This digital tax has been split out from the fee so is still non reclaimable (which I daresay is why Amazon done this) the VAT is still not reclaimable for non VAT businesses so is an additional deduction to your calculation.
So in effect your calculation still applies ie Profit = Sale price - cost of product in VAT - Amz fee (ref fee inc VAT, storage costs, fulfilment cost)
The actual profit will be less now than it was before as you quite rightly observed that large seller will be able to claim this additional tax back whereas non VAT registered business cannot.
Depending on your previous profit margins, i worked out that a non registered business would have to up the prices by around 3-5 percent in order to maintain the same net profit as before assuming the rates on all other variable were the same.
Seller_JkJ5Wu8mvvXN6
sales price minus
vat, referral fee, vat on referral fee, DST, Product
Seller_HVM1ultABtfiS
As far as I know if you are selling inside the UK and your company is also based in the UK and you are VAT registered, in this scenario amazon just calculate your VAT and do not deduct it from your sales made on amazon, you or your accountant have to separately file the VAT returns on quarterly basis.
After filing VAT returns for a couple of quarter you will know your incremental rate which you should factor in pricing your products.
Seller_51Trj4jpVFZCy
for VAT Calculation let me make it easy for you with an example. Lets assume you buy a product for £120 and sell for £240 inc VAT.
Lets assume Amazon Fees and shipping etc are £24 inc VAT for this example
Profit calculation will be as following
£240/1.2= £200 Ex VAT Sale
£120/1.2=£100 Ex VAT Cost
£24/1.2=£20 Amazon Fees
Your Total Profit will be
200-100-20=80
Total VAT you will pay for this sale to HMRC basically £40-£20-£4= £16 (Since you paid £20 when you purchase your product and £4 to Amazon when you get the service)
Also for big or small company no difference on VAT Actually sellers not really paying VAT. Only buyers are paying. on that example buyer paid £40 VAT in total you also paid £40 VAT to HMRC.
Seller_QuM1AZgzfU9x4
If you aren't VAT registered and are based in the UK then there is no VAT on your sales. Amazon just show it whether you pay it or not.
You will though have to add VAT to Amazon's fees as the revenue calculator doesn't show that.
Seller_QuM1AZgzfU9x4
If you aren't VAT registered and are based in the UK then there is no VAT on your sales. Amazon just show it whether you pay it or not.
You will though have to add VAT to Amazon's fees as the revenue calculator doesn't show that.
Seller_mS10UjVYuuGor
16.67% of the gross (total) sale price is another way of looking at nett sales price plus 20% so is correct but only relevant if you're VAT registered therefore collecting and paying it. If you're not VAT registered you won't be charging VAT on your sales but at the same time won't be able to reclaim VAT paid on your inputs of stock and fees.
Having glanced at BuyBotPro is appears to be mainly an arbitrage tool who are just dipping their toe into wholesale so there maybe better tools available to those seeking a wholesale business model. Regarding the conflicting VAT rates, at a guess either BuyBotPro is showing the difference in VAT if you were to buy/sell to/from different countries who have different rates of VAT or maybe its just poorly configured.
Seller_mS10UjVYuuGor
16.67% of the gross (total) sale price is another way of looking at nett sales price plus 20% so is correct but only relevant if you're VAT registered therefore collecting and paying it. If you're not VAT registered you won't be charging VAT on your sales but at the same time won't be able to reclaim VAT paid on your inputs of stock and fees.
Having glanced at BuyBotPro is appears to be mainly an arbitrage tool who are just dipping their toe into wholesale so there maybe better tools available to those seeking a wholesale business model. Regarding the conflicting VAT rates, at a guess either BuyBotPro is showing the difference in VAT if you were to buy/sell to/from different countries who have different rates of VAT or maybe its just poorly configured.
Seller_ae51e0CJoHqCX
If you are non VAT registered business then the VAT aspect of this becomes irrelevant. Using the calculators or these other tools that factor the VAT in are not really helpful unless you are VAT registered and even then I prefer to work it our for myself.
The fees on Amazon now show the VAT separate so since you cannot reclaim it, you now have to factor this in as is an added deduction. There are 2 things that have changed recently with the calculations and charges which is the digital tax and the VAT on fees. This digital tax has been split out from the fee so is still non reclaimable (which I daresay is why Amazon done this) the VAT is still not reclaimable for non VAT businesses so is an additional deduction to your calculation.
So in effect your calculation still applies ie Profit = Sale price - cost of product in VAT - Amz fee (ref fee inc VAT, storage costs, fulfilment cost)
The actual profit will be less now than it was before as you quite rightly observed that large seller will be able to claim this additional tax back whereas non VAT registered business cannot.
Depending on your previous profit margins, i worked out that a non registered business would have to up the prices by around 3-5 percent in order to maintain the same net profit as before assuming the rates on all other variable were the same.
Seller_ae51e0CJoHqCX
If you are non VAT registered business then the VAT aspect of this becomes irrelevant. Using the calculators or these other tools that factor the VAT in are not really helpful unless you are VAT registered and even then I prefer to work it our for myself.
The fees on Amazon now show the VAT separate so since you cannot reclaim it, you now have to factor this in as is an added deduction. There are 2 things that have changed recently with the calculations and charges which is the digital tax and the VAT on fees. This digital tax has been split out from the fee so is still non reclaimable (which I daresay is why Amazon done this) the VAT is still not reclaimable for non VAT businesses so is an additional deduction to your calculation.
So in effect your calculation still applies ie Profit = Sale price - cost of product in VAT - Amz fee (ref fee inc VAT, storage costs, fulfilment cost)
The actual profit will be less now than it was before as you quite rightly observed that large seller will be able to claim this additional tax back whereas non VAT registered business cannot.
Depending on your previous profit margins, i worked out that a non registered business would have to up the prices by around 3-5 percent in order to maintain the same net profit as before assuming the rates on all other variable were the same.
Seller_JkJ5Wu8mvvXN6
sales price minus
vat, referral fee, vat on referral fee, DST, Product
Seller_JkJ5Wu8mvvXN6
sales price minus
vat, referral fee, vat on referral fee, DST, Product
Seller_HVM1ultABtfiS
As far as I know if you are selling inside the UK and your company is also based in the UK and you are VAT registered, in this scenario amazon just calculate your VAT and do not deduct it from your sales made on amazon, you or your accountant have to separately file the VAT returns on quarterly basis.
After filing VAT returns for a couple of quarter you will know your incremental rate which you should factor in pricing your products.
Seller_HVM1ultABtfiS
As far as I know if you are selling inside the UK and your company is also based in the UK and you are VAT registered, in this scenario amazon just calculate your VAT and do not deduct it from your sales made on amazon, you or your accountant have to separately file the VAT returns on quarterly basis.
After filing VAT returns for a couple of quarter you will know your incremental rate which you should factor in pricing your products.
Seller_51Trj4jpVFZCy
for VAT Calculation let me make it easy for you with an example. Lets assume you buy a product for £120 and sell for £240 inc VAT.
Lets assume Amazon Fees and shipping etc are £24 inc VAT for this example
Profit calculation will be as following
£240/1.2= £200 Ex VAT Sale
£120/1.2=£100 Ex VAT Cost
£24/1.2=£20 Amazon Fees
Your Total Profit will be
200-100-20=80
Total VAT you will pay for this sale to HMRC basically £40-£20-£4= £16 (Since you paid £20 when you purchase your product and £4 to Amazon when you get the service)
Also for big or small company no difference on VAT Actually sellers not really paying VAT. Only buyers are paying. on that example buyer paid £40 VAT in total you also paid £40 VAT to HMRC.
Seller_51Trj4jpVFZCy
for VAT Calculation let me make it easy for you with an example. Lets assume you buy a product for £120 and sell for £240 inc VAT.
Lets assume Amazon Fees and shipping etc are £24 inc VAT for this example
Profit calculation will be as following
£240/1.2= £200 Ex VAT Sale
£120/1.2=£100 Ex VAT Cost
£24/1.2=£20 Amazon Fees
Your Total Profit will be
200-100-20=80
Total VAT you will pay for this sale to HMRC basically £40-£20-£4= £16 (Since you paid £20 when you purchase your product and £4 to Amazon when you get the service)
Also for big or small company no difference on VAT Actually sellers not really paying VAT. Only buyers are paying. on that example buyer paid £40 VAT in total you also paid £40 VAT to HMRC.
