Amazon's Big Notice! Commission and FBA Tax Standards Confirmed!

When Amazon notified everyone last week that it would charge taxes on commissions and FBA fees on its US site, it caused fierce protests and doubts.

The official statement on this matter was ambiguous, and even the tax rate and conditions for taxation were not specified. This notice from the backend also received a unanimous “Not helpful” response from sellers.

Such fierce opposition and protests from sellers forced Amazon to take it seriously, and just last night, it sent a group email to sellers to apologize and provide detailed explanations .

Let’s skip the apology statement. The most important part is the second half of the email, where Amazon explains some of the issues that everyone is most concerned about.

What taxes will be collected?

What are the conditions for collecting taxes?

How much tax is collected?

Let me take you to look at the answers to these questions.

To put it bluntly, the tax announced by Amazon this time is actually a consumption tax. When it comes to consumption tax, everyone already knows that it is actually the buyer who pays the money and the seller is responsible for collecting and submitting it.

However, the consumption tax this time is different. In this taxation incident, we are buyers , and what we purchase are Amazon's services (such as platform commissions and monthly fees, FBA packaging fees, etc.). Amazon, as the party providing (selling) these services, naturally has to collect taxes from us who purchase the services and pay them back.

Now that we have understood the tax types, what are the main items that Amazon is taxing this time? They can be roughly divided into two types:

I. The first is the platform service fee , which includes many Amazon platform fees that are incurred during normal sales. The details are as follows

II. The second type is various miscellaneous fees incurred by using FBA (note that the official did not indicate that FBA storage fees and logistics fees are included, these two are the big ones), as follows

In theory, any seller who incurs the above fees and pays money to Amazon needs to pay taxes on these fees.

But when it comes to specific implementation, we know that these consumption taxes are collected by state governments. What are the criteria for determining whether Chinese sellers need to pay taxes?

First, Amazon platform service fee tax requires the seller's business to be located in the following states

That is to say, if the company address is located in these states, the seller needs to pay taxes for the platform service fee. Most Chinese sellers can avoid this tax, but the following FBA miscellaneous fee tax is dangerous.

I think everyone can guess that the FBA miscellaneous fee tax will definitely be collected based on the state where the FBA warehouse is located . So where does this tax apply to? The following is the official list

If you have goods in the FBA warehouses in the above four states, then when you incur the several FBA miscellaneous fees listed in the first item, you will need to pay taxes for these fees. (For the specific tax rate, you can private message me to get the tax rate map)

Let me give you an example to explain how this tax is calculated.

Suppose I sold a product worth $100 and the commission rate for the category of the product is 15%, then I would need to pay Amazon a sales commission of $15.

Unfortunately, my account is registered with a US company, and the company address is also in a taxable state (assuming the local consumption tax rate is 6%), so I need to pay tax again for the $15, which is $0.9 (15*6%).

Even more unfortunate is that the goods were returned by the customer and were returned to a state that charges FBA miscellaneous fees and taxes (assuming the local sales tax rate is 6%).

After receiving the package, Amazon's local warehouse repackaged it and sold it normally again, but this repackaging service charged a service fee of US$5, and I had to pay US$0.3 (5*6%) tax for this US$5 service fee.

Although not many states are involved now, it is likely that more and more states will follow this tax policy in the future. It may seem like a small amount of money, but as the order volume accumulates, the seller's costs will rise sharply.

Will the US site eventually implement tax compliance like the European site now? We can vaguely see some signs from the recent consumption tax actions.

The increase in tax costs is an irreversible trend in the long run, and we sellers must prepare high-profit routes in advance to cope with the increasingly high costs.

If you want to calculate how much your costs will increase if the state where your FBA warehouse is located collects taxes, you can chat with me privately to get a map of state tax rates in the United States.

PS. If you want to join the seller discussion group, you can also private message me to let me add you to the group

In addition, in order to provide an effective and timely solution platform for Amazon sellers to solve the operational problems they encounter on a daily basis, we gathered together big sellers from various industries in June last year to operate an exclusive knowledge sharing circle.

In addition to the fixed daily Q&A sessions , 12 guest sellers from different fields will also regularly share their Amazon experiences and skills in the circle.

Daily Q&A

Experience Sharing

Tips

At the same time, the circle will provide some free operation software and usage tips from time to time, and also enjoy the green channel of various Amazon official activities (such as high-quality investment managers, BD resources, Primeday Exclusive, etc.)

Want a big seller to help you with sales? Simply scan the QR code below to join and view more content in the circle.

Source: Cross-border Business School

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