Amazon is in big trouble? It may face a fine of 270 million

Yesterday we talked about a seller in a US store who also received a message about the European VAT number. Today, we received feedback from many students, saying that they had received such an email. (Click here for details of the incident)

Let me tell you again here that the emails most people have received are just notifications, which means that Amazon will synchronize the foreign sales data you generated in 2019 to the local tax bureau.

Sellers who receive such notification emails do not need to take further action. Currently, Amazon will not force sellers to upload tax numbers if the remote sales threshold is not met.

Recently, Amazon has been facing an even bigger trouble in Europe. According to foreign media reports, the European Union has issued a fine of up to 270 million US dollars to Amazon, and will open a court hearing on Amazon's appeal on Thursday.

The European Commission said in the ruling that Amazon evaded taxes by setting up a large number of subsidiaries and transferring profits to these companies. There were illegal operations in the process - Amazon's European division paid a large amount of intellectual property royalties to a subsidiary in Luxembourg, but the subsidiary had no employees, offices, or any business activities.

After a long investigation, the European Commission asked Amazon to pay up to $270 million in back taxes to the Luxembourg government where its subsidiary is located . Amazon is fighting the EU's ruling on the grounds of procedural illegality and discrimination, and the two sides will go to court at Europe's second highest court on Thursday.

Amazon is good at delaying or even avoiding paying taxes. Last year, it was revealed that Amazon earned $16.8 billion in profits in 2017 and 2018, but did not pay any federal taxes . Instead, it received a $ 260 million tax refund from the federal government. Because Amazon's methods are cunning but legal, the US government actually turned a blind eye to it.

However, the EU is different from the US. The EU will not let an American company off lightly if it evades taxes in Europe. In addition, the shell company Amazon uses to evade taxes is also located in Luxembourg. It is difficult for Amazon to get away with it this time like it did last time when it was exposed in the US.

The grievances between Amazon and the EU are like a battle between gods for us sellers. Every move by both sides may have a huge impact on our business environment. If Amazon is forced to pay taxes, or partially pay them, it will definitely not be a good thing for sellers.

Seller costs may rise

Last year, an incident occurred that shocked the seller community. Amazon passed on the digital tax imposed by the French government on technology companies to sellers , allowing sellers to bear the additional costs generated by this tax.

Amazon will raise the price for sellers after collecting taxes from them, but Amazon cannot lose a penny of its own profits. This shameless behavior really made sellers curse, but Amazon not only turned a deaf ear to it, but even claimed that it would transfer the 2% tax to sellers on the UK site.

Although the French and British governments announced the cancellation of digital taxes after the United States and the European Union reached a new trade agreement, Amazon also canceled the adjustment of commission increases and refunded the additional commissions already collected.

However, the tax that Amazon was fined and required to pay back this time is a regular tax, which cannot be canceled just like the digital tax. If Amazon loses the case this time and has to pay back taxes or face higher tax costs in the future, Amazon will definitely find a way to transfer these costs to sellers.

The EU imposes taxes on Amazon, and we third-party sellers are the ones who end up bearing the extra costs. It’s really a fight between gods and mortals. In the foreseeable future, the extra costs of taxes on the European site will continue to rise.

In order to survive, in addition to setting up sufficient profit margins, various cost-saving measures must be adopted to minimize controllable costs.