Amazon deducts payment directly from orders! New policy officially implemented

After the new year started, many UK sellers were surprised to find that their orders for the new year were directly deducted by Amazon! And the amount was not small! More than one-tenth of their sales were gone!

The order details in the background show that the item deducted is the mall VAT tax , which is displayed similarly to the sales tax on the US site. It can only be seen by clicking on the order or the payment summary in the background.

In fact, Amazon announced this news a long time ago. In October last year, the official sent a wave of emails to remind sellers to pay attention to the changes in VAT policy after Brexit.

In addition to the changes in tax thresholds and aspects, the most important change is that sellers previously registered their own tax numbers and declared them, but now Amazon collects taxes for each order and submits them to the tax bureau. The implementation date of this change is January 1, 21, which means that for orders placed after New Year's Day this year, Amazon will collect VAT at the standard rate (20%) .

This is a big deal. There are still many sellers in the UK who are using preferential tax rates to make low declarations, and some are even making zero declarations to make quick money. Now Amazon has directly deducted the tax from the orders, leaving sellers with no room for maneuver . If they want to maintain profits, they can only raise prices.

Even some self-shipping sellers whose remote sales do not reach the tax standard have to start paying taxes on each order, which is quite disadvantageous to small sellers.

In fact, if the seller's business in Europe has always been operated in compliance with regulations, the impact of this new change on costs will not be too great. At most, it will be painful to see money deducted for each order. In fact, it is just a one-time tax distributed to each order.

Some sellers who have secretly calculated the tax rates will find that the actual tax rates are not charged according to the standard rates. What is going on?

After calculation, some sellers found that the ratio of the deducted tax to the product sales price was not the standard rate (20%), but 16.7% . Did Amazon underestimate it?

In fact, Amazon assumes that the price quoted by sellers includes tax. For example, if we price a product at 10 pounds, the 10 pounds includes the product price + tax . If we calculate it backwards, the actual price of the product is 10/(1+20%), which is 8.33 pounds, and the tax is 8.33*20%, which is 1.67 pounds , which is exactly 10 pounds. Some sellers actually calculate the 16.7% tax rate by using tax/tax-inclusive price.

We sellers don’t often use tax-free prices in our daily operations, and we directly use the quoted price as the selling price. Therefore, considering the convenience, it is not a big problem to directly regard the tax rate as 16.7% during operation. However, if it involves tax operations (tax refunds, etc.), we still have to clarify the tax-inclusive price and the product selling price.

Some sellers have asked me under what circumstances taxes will be deducted. We had a detailed analysis in October. You can click here to jump to view. I will briefly summarize it:

1. In the case of self-delivery (delivery from abroad to the UK), taxes will be automatically deducted for unit prices below £135.

2. Domestic delivery, such as FBA, will automatically deduct taxes (unless the account owner is a UK company)

It can be said that the vast majority of UK sellers are required to automatically deduct taxes, so sellers who have not prepared for compliance in advance must recalculate their profit margins and not wait until the inventory to discover losses.

It is still necessary to raise prices. If the order volume decreases after the price increase, you can try a large-scale promotion first, and then gradually reduce the intensity. With some keyword re-positioning and optimization, you can slowly increase the order volume and ranking.

In short, the UK site has forced sellers to comply with regulations this time, so other European sites are still very competitive in comparison. Some sellers who do business in both Europe and the UK have chosen to give up the UK site directly. If you plan to enter the European market, I have an official Amazon European site registration guide that will explain in detail the precautions for filling out each step.