Amazon FBA and VAT: Tips to save some money 💵
VAT, or value-added tax, is a tax charged to the seller, who in most countries is usually the business seller of the product. For example, if you’re selling clothes online and shipping from the US to India, VAT might apply.
But what does VAT do? And how can you use it to your benefit when selling online? We’ll answer these and many more questions about VAT in this blog.
Learn the basics about VAT 📃
VAT is a tax charged on sales of goods and services in countries that have a value-added tax system.
This tax is collected from sellers who are registered with the tax office and are required to declare it on their sales.
Thus, selling on amazon FBA with amazon FBA tax is beneficial for sellers as amazon does not charge sales tax for amazon FBA transactions. But sellers must register the company at the tax office and declare the sales tax charged on their sales.
Rates vary depending on the destination country of the goods. Generally, the sales tax rate is around 10%.
Automating invoices, claiming money back, and filing tax returns can all be done with a VAT number. This will help sellers save time and money.
Amazon charges storage fees for items stored in its warehouses. The fees depend on the size of the item and the seller’s account balance.
Sellers should keep an eye on amazon’s FBA tax rate as it is likely to increase soon.
Also, sellers should ensure they collect GST (Goods and Service Tax) from customers where applicable.
How VAT differs from US sales tax 📃
All sellers using Amazon Fba must be registered at the tax office to comply with legal requirements and regulations regarding Value Added Tax (VAT).
This tax is charged for all orders that Amazon sells within the European Union, with rates depending on the local legislation of the destination country.
Sellers must ensure they comply with relevant VAT regulations to avoid facing penalties or being subject to tax audits.
For example, sellers must account for sales and costs and report them to the tax authorities. They must also keep records of their sales activities, including sales tax returns, sales invoices, and packing slips.
Amazon sellers are responsible for making sure they comply with relevant VAT regulations. They must account for sales and costs, keep records of their sales activities, and report sales to the tax authorities as required. EOS
Tips to save money 💲
- Keep physical and digital receipts to save time with tax filings
- Use tax software to calculate sales tax and input tax deductions
- Sign up for a free eCommerce newsletter for tips on VAT-compliant sales
- Register the company with the tax office and declare sales taxes
- Calculate input tax deduction to avoid financial risks
- If you are selling on Amazon, you must file sales tax with the relevant tax authority. A few essential tips include:
- Sign up for a free ecommerce email newsletter to stay informed on VAT-compliant sales
- Use tax software to calculate sales tax and input tax deductions
- Register your business with the tax office, declare sales taxes
- Calculate input tax deductions to avoid financial risks
1. Get a good tax accountant 👨💻️
It is important to get a good accountant for Amazon FBA VAT.
A good accountant will help you understand the tax implications of your business and offer tax-saving recommendations.
Financial software like fetch can help with sorting through data and making tax-saving decisions.
Selling on amazon FBA means you need to become familiar with amazon FBA sales tax duties and guidelines.
A tax advisor can help you understand all the tax requirements and provide guidance on amazon FBA sales tax duties.
2. Stay on top of state sales tax 👨🏫️
As an Amazon FBA seller, you’re responsible for collecting sales tax in all states where you have “nexus,” which means you have a physical business presence in the state.
You’d need to register with the relevant authorities in your state and follow the tax rules specific to that state. For instance, if you run a business from your home in California, you’d be required to pay California sales tax on all purchases made within the state.
Similarly, if you use an Amazon FBA seller account for your e-commerce business and are based out of a different country, then you’d be required to follow the tax laws of that country.
In other words, sellers don’t get any privileges or exemptions under GST or VAT rules. Plus, they are also required to deduct expenses such as office expenses and inventory expenses when filing GST/VAT returns.
In case you are looking for a third-party tax tool for managing sales tax across countries and states, we recommend TaxJar as it offers great features and ease of use. It helps sellers easily track and pay taxes by providing detailed reports on sales activity and income.
Deductible expenses for Amazon FBA taxes include
- Commission fees
- Subscription fees
- Office Supplies
Also, VAT compliance needs to be observed in Europe when trading on amazon FBA.
3. Select the right inventory accounting method 📦
Understand the legal requirements and regulations associated with VAT in Europe
Register your company with the tax office and declare all incoming and outgoing sales
Keep track of Amazon FBA fees such as storage and handling fees, which increase during the holiday season
Make sure to account for all costs associated with FBA inventory, shipping, amazon fees, cost of goods sold, home office costs, employee salary, and consultant fees
Be aware of the sales tax charged on all sales and the input tax deduction for naming the VAT from incoming invoices
If you’re selling on Amazon’s FBA platform, you’ll need to account for VAT in your business expenses. To do this effectively, it’s vital to understand the legal requirements and regulations surrounding VAT in Europe. This will help you correctly record your business expenses.
Registering your business with the tax office is another vital step. This will ensure you receive correct tax deductions and expenses. When it comes to amazon FBA fees such as storage and handling fees, they increase during the holiday season.
Therefore, it’s crucial to keep track of these additional expenses carefully. You’ll also need to account for all costs associated with amazon FBA inventory, shipping, amazon fees, cost of goods sold, home office costs, employee salary, and consultant fees.
4. Don’t forget deductions
Be aware of all your eligible deductions when filing taxes for your Amazon Fba business.
Some common deductions that can be applied include amazon fees, FBA seller education courses, amazon inventory costs, shipping expenses, office supplies, and FBA seller tax credits.
Another way to save money is to automate the amazon invoicing and filing of tax returns. This will ensure you are up to date with tax filings and don’t have to spend time sorting through receipts and other documents.
Creating an Amazon tax account and uploading tax returns through this account, it’ll make the process more efficient and save time overall.
Another tip is to take full advantage of amazon’s free seller toolbox. This offers valuable resources such as amazon seller central tax tools, FBA seller tax guides, FBA seller income calculators, FBA seller income tax FAQs, and more. It provides helpful information for tax planning and compliance for amazon sellers.
Also, consider scanning physical receipts for amazon sales tax purposes. By taking these simple steps, you can save money and get back to focusing on growing your business.
As you can see, there are many ways to save money and time when it comes to FBA and shipping. By using the tips mentioned above, you’ll be well on your way to fulfilling your customers’ orders from home and saving lots of money in the process.
However, if you’re still not getting fulfillment from home, we suggest that you look at the solution offered by third-party fulfillment companies like Shipwire or Fulfilled By Amazon (FBA).
They’ve helped thousands of businesses like yours fulfill their customers’ orders without compromising on quality. It’s time for a change!