How VAT differs from US sales tax
There are many differences between VAT and US sales tax. But there are two in particular that all non-EU-based sellers who consider selling in the EU should know about.
1. VAT is payable upon import. When sending goods to a US fulfillment center, you don’t have to pay sales tax in the US. However, as soon as you ship inventory to Europe (for example to a fulfillment center when using Fulfillment by Amazon, or FBA), you must pay that country’s import VAT.
“For our business, the initial cash outlay for import VAT was a substantial amount,” Dan says. “However, we were confident that our sales velocity would be sufficient to minimize that loss in working capital between paying VAT at customs and final product sale.”
2. VAT is included in the sale price. Unlike in the US, where sales tax is added to the list price, VAT is included in the list price in the EU. Let’s say that you sell a product on Amazon.com for $100. To sell it for the equivalent price in the UK, you would list it on Amazon.co.uk for $120 (assuming 20% VAT). This is important to remember when analyzing competitive pricing on Amazon’s European marketplaces.
“Sellers sometimes assume that VAT is collected and paid to the tax authorities by the customer or online marketplace” says Melanie Shabangu of AVASK, one of the VAT service providers on Amazon’s Service Provider Network. “This means that when a VAT quarter is due, they have not collected and saved the VAT liability themselves and the payment has to be made purely out of profits. This can easily be avoided by marking up your products in such a way that VAT is included in the retail value, knowing the VAT rate you should be charging.”
Where to register for VAT
If you store inventory in Europe you are required to have a registered VAT where your goods are stored. Many selling partners start their EU journey by storing goods and registering for VAT in Germany and UK. Here’s why:
- Germany and the UK are Europe’s largest opportunities for ecommerce meaning that inventory within the country is important to reach more customers with faster shipping options. Check out Amazon Europe’s fulfillment options to find the one that works best for you!
- Mitigates the risk disruption with logistics due to Brexit.
- The information required for UK and Germany VAT are simpler than other European countries.
When the business grows and expands, further registrations for VAT might be needed.
The time it takes to become VAT registered can vary. To avoid delays, start the process as soon as you register your EU seller account.
VAT Services on Amazon
Use VAT Services on Amazon to manage your VAT registration, filing and submission requirements. Amazon works with global tax service providers to enable VAT compliance in UK, Germany, France, Italy, Spain, Poland and Czech Republic.
When you join VAT Services on Amazon, Amazon will cover the cost of the first 6 months of filing and fiscal representation in all countries you subscribed in! After your first 6 months, you will be charged a monthly fee for VAT services on Amazon - as low as €33.30/month (1 country, without fiscal representation).
Get guidance on VAT registration and automated VAT filings.
You will only need to provide us with the data and documentation we will request based on the countries you choose, and VAT Services on Amazon will take care of the complex, costly and time consuming processes for you.
Dedicated customer support
VAT Services on Amazon offers self-service help content as well as dedicated customer support directly provided from our Seller Support team in Chinese, English, French, German, Italian, Spanish, Korean and Japanese.