FBA Double TAX?

#122

Have you remembered to allow for VAT on the fees? fees are displayed without vat, but you’ll need to add 20%.

#123

The guys often making the YouTube videos don’t even realise that, that why you see alot of " my account got suspended" videos

#124

I see this all the time on a local market. Traders excited that they make £100 a day. They mean they’ve done £100 in sales. Minus £50 cost of stock, £35 rent, £30-50 in fuel, tea/coffee/bacon butty, insurance, wear & tear on the vehicle. They think I’m an idiot when I tell them that they are actually LOSING money! :joy:

#125

I think there’s another one, something about flogging a dead horse!

#126

I dont use FBA - why is this guy paying for his customers VAT?

If the product is £2.50 and VAT 50p why is the seller footing this bill?

#127

he’s paying VAT on amazon seller fees

#128

Ahh

I mean, surely that was self evident to the OP. No wonder the reserve balance was in arrears.

#129

it sort of was - the problem is that he thinks his friend (who is selling the same items - but thats a different story !!) is paying different fees on the same sales

#130

In Regards to paying “double tax.” You are not paying double but if you are selling small products through FBA you could actually save money by registering for VAT.

This of course depends on the profitability of your products and what percentage the amazon fees are of your total sale price. I have recently crossed the threshold and found some very interesting things when costing up my products to check how profitable they would be after registration.

Basically the total amount of Vat you pay as an unregistered seller is equal to to 20%VAT of on the products you bought/import VAT plus 20% VAT on the amazon seller fees.

If you are a registered seller the total amount of VAT you pay is the 20% of the sales price of each product MINUS the 20% VAT you paid when buying the products and MINUS the 20% VAT on the fees.

Now in most instances for high value products where the FBA fees are not a considerable percentage of the sales price being a registered seller means you have to pay more VAT.

But in some cases where you are selling low value products where the FBA fees are a high percentage of the sales price you can actually end up paying less VAT after registration.

I highly recommend getting a spreadsheet and properly costing all of your products

#131

And minus 20% on everything else the business buys (stationary, postage fees on parcels, car fuel etc).

Most people think that when you register for VAT, you instantly increase your costs by 20%. It’s actually 20% of the difference between sales and VATable costs, which in most cases is about the same as your profit (only difference being that some costs are VAT exempt). This does essentially mean you get taxed twice (VAT and income/corporation tax) but that is a whole other story.

#132

how do you work that one out ?

you won’t pay VAT on seller fees but you have to incorporate VAT in your sales ?!?!

#134

It completely depends upon the price and profitability of your item. Mainly what proportion of your sales price is FBA fees, if this is very high then by being unregistered you have to pay VAT on these fees and this quickly eats into your profit.

Have a look at this spreadsheet. The orange shows the VAT paid prior to registration and the Red next to it the net VAT paid after registration.

You can see how for small value items the net VAT after registration is lower than the VAT paid before, increasing profits but for higher value items the net VAT paid after registration is more, decreasing profits.

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#135

yes but again, if you are registered for VAT - that has to be incorporated in your sales

its not about the amazon fees - its about the total profit on the item

#137

Yes, Sales VAT is accounted for here under the sales column. The net VAT i.e the overall VAT you will have to pay to HMRC is equal to the VAT on sales minus the VAT paid on imports/purchase and minus the VAT on FBA fees which you have to pay if you are unregistered.

#138

I’m getting confused on your table. In the green section where it says ‘sales’ the top line says

Sale Price - 8
Vat on Sales - 1.6

vat on 8 is not 1.6 ?! its 1.33 - likewise for the whole of that column. You have added on 20% instead of incorporating it

are you trying to show the difference whereby you sell at £8 if you are not vat registered and £9.60 if you are vat registered ?

#139

Also the Amazon fees in your column state

Fees without VAT £28.80
VAT on amazon fees - £7.20
Total - £36

if its the total then VAT amount in £36 is £6 not £7.20 ?! and the other way round - £28.80 plus VAT would be £34.56

what calculations have you used in your table ?

it seems like you are adding on VAT each time rather than incorporating it

so if the total fees are £36 - you don’t do 36 x .2 to get the VAT rate
you do £36 divided by 6 - that gives you the 20%

#140

lets do an example of how it WON’T save you money if you are VAT registered

scenario 1 - you are not VAT registered
You sell an item for £12
the cost of the item to you is £3 and the fees £3 - you make £6

scenario 2 - You are VAT registered
You sell an item for £10 plus £2 VAT - £12 total
The item costs you £2.50 plus 50p VAT - £3 total
Fees are £2.50 (no VAT as reverse charge) - you make £5

I can see that you think by paying less FBA fees it adds onto your profit but you are forgetting the VAT due on the sales - in the above instance you would have to increase your prices to make the same profit

#141

agreed, the only reason you would register for VAT in my opinion is if you hit the revenue threshold, there are no benefits to your profits otherwise!

closed #142

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