VAT on Amazon Transactions (even better if the reply is from a Sage expert!)

[Katy1980]

Hi there!

I sell jewellery on Amazon in two ways:
-Some of the stock I have at home and I ship out myself
-Some stock I send to Amazon who ship it on my behalf.

A typical transaction that I stock at home & ship out myself looks like this:

Product Charges:
Sale £9.99 (I post in Sage to 4000 - Sales)

Amazon Fees:
Commission -£3.23 (I post to 5104 - Amazon Fees)

Other:
Postage £1.19 (I post to 4000 - Sales)

Transaction Total: £7.95

I assume the above is correct (I hope so anyway!)

A typical transaction that is stored at Amazon (and they ship on my behalf) looks like this:

Product Charges:
Sale £8.99 (I post to 4000)

Amazon Fees:
Commission -£2.59 (5104)
Fulfilment fee -£0.29 (5104)
Per unit fee -£0.71 (5104)
Weight based fee -£0.06 (5104)
Gift wrap chargeback -£2.54
Shipping chargeback -£7.65

Other:
Gift wrap £2.54
Shipping £7.65

Transaction Total: £5.34

My query is the parts in red. Because they contra each other, I'd like to think I post nothing because Amazon actually take that money (basically in this situation the customer has requested expedited shipping and gift wrap and have paid a total of £10.19 for the privilege which is money Amazon makes).

Because my fortnightly sales statements from Amazon were not very clear, I've realised I've been posting £10.19 as a payment to 5104 then as a receipt to 4000. But I don't believe I should be paying VAT on the £10.19 as I'm not the one making that money - Amazon is! (I'm on the Flat Rate Scheme by the way at 6.5%)

Should I ignore and not post the parts in red?

Any help is greatly appreciated

 

[Ray_Stewart]

From what you have said the items in red are not your supply or charge. They merely appear on your Amazon statement for Amazon's internal system to keep track of.

I would safely disregard these entries as they relate to a seperate agreement between Amazon and the customer for extra services that Amazon provide - so nothing to do with you.

Hope this helps

 

[Katy1980]

Oh, it most certainly does help. Thank you SO much! I've got (alot) of VAT to claim back now. WOOHOOOO! What a relief. I don't know you, but I love you! :0)

 

[samuel5]

Just looked this up myself and found the info below from Amazon help pages. Basically, you do need to account for the whole amount of the sale including shipping costs amazon charge the buyer


For any Amazon fulfilled orders (FBA orders) we will determine the amounts charged to the customer for shipping and gift wrap services.
FBA orders may qualify for free shipping according to the Amazon shipping rules. In these cases, we do not charge shipping fees to the customer and in turn we do neither remit to nor debit shipping fees from your Amazon Seller Account.
If however a customer is charged for shipping and/or gift wrap services, this revenue is part of your sales transaction and remitted with the amount of the item price revenue to your Amazon Seller Account. These revenues are featured as "Shipping" and "Giftwrap" in the settlement report and in the transaction details. The total value of the sales transaction is the item price plus shipping and/or giftwrap revenue paid by the buyer. You are responsible to account for any applicable VAT on the total value and in the event that you issue a VAT invoice to the buyer, you are required to include the amount the buyer paid for shipping and/or giftwrap. In this, Fulfillment by Amazon transactions are no different compared to sales transactions related to items you fulfill yourself and where the buyer is also charged for shipping and/or gift wrap. To identify all revenues between the seller and the buyer, access the new shipment report from the "Order Reports" link on Amazon Fulfillment Reports.
After remitting any shipping and giftwrap revenue into your Amazon seller account, we will charge you a fee equal to the amount of any shipping and/or gift wrap fee charged to the buyer. Such transactions are called "Shipping Chargeback" or "Giftwrap Chargeback" in the Settlement report. In some cases, the "Shipping" or "Giftwrap Chargeback" might be lower than the amounts that were remitted to your Amazon seller account, however this does not impact the amount paid for shipping and/or giftwrap by the buyer and which should be included on your VAT invoice to the customer. We also refer to Clause F-9.2 of our Amazon Services Europe Business Solutions agreement.
If, at any time, you are unsure of your VAT obligations we strongly recommend you verify these with your local tax office or contact your tax advisor.

 

[Katy1980]

Thanks for this detailed information. That's NOT good news for me, as I now have to make an adjustment which is going to cost me a small fortune. Glad I know though as it's important I do it right. I'll never take advice from a forum ever again in my life after this incident.

 

[samuel5]

We are in the same boat as you

 

[Zara Accountancy]

Hi, it is always risky proceeding with financial transactions based upon advice from somebody who may not be conversant with the full details. This is why some users on here mention that they accept no liability for any advice.

In this case, though I am not familiar with the detail, I believe that the VAT should net off, as most certainly you should not be liable for output VAT without receiving the input VAT back from Amazon to offset it. Therefore, both transactions should contain VAT and the total due from you will be zero.

My advice would be to contact Amazon directly, ask to speak to someone who has sufficient knowledge of the finances, and explain your issue in dealing with the VAT.

Good luck!

 

[Kevin Hall]

Zara, Katy's business is on the Flat Rate Scheme so she cannot recover input VAT on charges from Amazon.

In fact, I'm not even sure that Amazon don't "Reverse Charge" their charges from abroad anyway (i.e. no VAT is charged on the Amanzon invoices themselves).

Katy, I don't know how karge your business is (or will become), but you might want to consider setting all your documentation before an experienced VAT adviser and asking them to point you in the right direction. If you do that once, you can use the correct procedure repeatedly yourself without further recourse.

Hope it helps?

 

[Katy1980]

Thanks for all your replies. I love that the business community comes together and helps each other out.

I've just noticed that this post was originally posted quite a while back when I was a sole trader on the flat rate scheme. I am now a Limited company on the standard VAT scheme. Either way, I use an accountancy practice now so they can check everything is correct and above board. They think it sounds like I don't owe VAT as it's nothing to do with me that Amazon charge customers for that service... but they are getting it fully looked into.

 

[Kevin Hall]

Katy, it sounds as though Amazon charge your business for the giftwrap service (etc) and you recharge this to the customers.

If so (and your summary fo the Statement from Amazon appears to reflect this), it would constitute part of your sales price to the customer. Your business would have to account for the VAT on purchase (from Amazon) and on sale to the customer.

The only escape I can imagine at the moment is if you treat the giftwrap service (etc) as a "Disbursement". There are a number of quite specific tests you must pass to take advantage of this. One is that the customer is aware that they are employing your business as an agent to pay an expense (from another supplier, Amazon) which properly blongs to the customer and not to your business. Another requirement is that the Disbursements are separately identified as such on the VAT invoices issued to the customers.

Hope it helps ... though I fear it might not.

 

[samuel5]

Hi Katy,

Please do let me know what your accountants said.

Charges for giftwraping, express shipping charges etc are charged to you in your FBA invoice from Amazon with the VAT they collect from it deducted.

Say a customer purchases an item via FBA for £10 and pays Amazon a further £5 for express shipping, Amazon give you the £15 for the sale, and then in your FBA invoice they will charge you £4.17 for the express shipping.
So you then pay the VAT man the £0.83 from the £5 Amazon have paid you but then get charged £4.17 in your FBA invoice.

 

[etrades]

Hello

I believe this thread is quite old , but wanted to know if OP or others were able to figure out this VAT issue on Online platforms

I believe HMRC and accounting firms should be looking into such queries as more and more business going online

i find it very confusing , as to why we would have to pay VAT on the services offered by say AMAZON for gift wrap/courier

Also when a sale happens we pay VAT on actual sales amount , technically shouldnt we be paying vat after deducting amazon/ebay fees , as its their earnings and they will be paying VAT on that

in such case wouldnt it be double VAT on same amount of earnings ?

If someone can shed some light on this , would be great

thx in advance

 

[etrades]

Hello

Guess everyone would be busy catching up with work.

 

[Scalloway]

VAT is a tax on consumption, so i just gets added on and the end consumer picks up the tab.

 

[etrades]

VAT is a tax on consumption, so i just gets added on and the end consumer picks up the tab.

yes i understand that, what i mean was as a traders there you pay VAT even on the commission amount charger by amazon , am i right ?

regards

 

[Scalloway]

Yes. Commission is a VATable supply.