Amazon FBA Guide: Setup, Tips, Costs, Taxes

Fulfillment by Amazon – FBA: With these three letters, the online giant started a revolution in online retail in 2006. Since then, FBA has enabled millions of people and companies to quickly (but not necessarily easily) set up and often successfully operate their own e-commerce business.

Various Amazon services are supposed to help traders make things as easy as possible and concentrate fully on sales. But is that really the case?

If you use FBA as an online retailer, you benefit first of all from the huge, optionally also international, reach of Amazon. In addition, Amazon relieves you of practically all time-consuming logistical steps such as storing, packing and shipping your products, invoicing, customer service and even handling returns.

Sounds very promising so far. But, as almost always in life, there are two sides to the coin with Amazon FBA.

Amazon FBA Seize opportunities, know risks, minimise costs

Of course, Amazon does not offer the convenient FBA services for merchants for free. With various fees, commissions and cost sharing, Amazon makes a very good profit from the success of FBA and marketplace traders. And then you also have to pay taxes…

Therefore, if you want to successfully build or grow your own FBA business, you should know the following factors and use them to your advantage:

• the many ways to increase your sales at Amazon
• The numerous, but often difficult to understand factors for minimising your efforts and costs incurred through FBA (partly also indirectly).

Benefit from the experiences that thousands of our customers share with us as Amazon FBA sellers through our FBA guide. And benefit from the personal insights of our employees: Here in our Taxdoo team in Hamburg, we employ former Amazon merchant advisors as well as proven tax and accounting professionals.

Many Amazon FBA guides conceal hidden cost factors

There are already some really good and comprehensive guides and step-by-step instructions on how to launch and grow your Amazon FBA business.

In most guides you can read a lot about the great (earning) opportunities as an FBA seller. And yes, the possibilities of the FBA offer are impressive. However, the path to sustainable sales success also involves effort. And two aspects in particular can only be found very superficially in the vast majority of FBA guides, if at all:

• Your tax obligations arising from FBA trading, especially abroad,
• and the requirements for error-free and up-to-date accounting (Fibu) at all times, in particular due to the introduction of a major VAT reform for online trade and the “one-stop shop” for VAT reports set up for this purpose from 01.7.2021.

As a (prospective) FBA retailer, you should not only be aware of the many opportunities, but also the numerous and partly hidden or indirect cost factors of the Amazon FBA programme from the very beginning, keep an eye on them and include them in your calculations.

Good to know:

Nowadays, you can have software solutions take care of your tax and financial accounting duties, which are sometimes perceived as a nuisance, automatically and in compliance with the law. We also report on this in this guide.

In this way, you avoid potentially expensive mistakes and omissions and can relax and build up a successful and lucrative business as a Amazon FBA seller in the long term.

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Table of contents:

1. Amazon FBA: What is it? What possibilities, advantages and efforts does it bring you as an online retailer?
2. Does your FBA business idea have a chance of success? Market research and product research
3. How much start-up capital should you plan for as a new FBA seller?
4. FBA costs and fees
5. Requirements for your FBA business
6. Procurement for your FBA business
7. FBA expansion abroad: In which markets do you want to sell?
8. Storage of your goods at Amazon: domestic, CEE or PANEU?
9. Foreign Value Added Tax obligations by using Amazon FBA warehouses
10. Before your first FBA sale abroad: Do you need a foreign tax number?
11. Listings, Amazon SEO & Sponsored Products Ads
12. Create FBA invoices and keep an eye on sales
13. Amazon FBA and Value Added Tax obligations in your home location
14. Do you need a special Amazon FBA tax advisor?
15. Amazon Report FBA sales via OSS
16. Special case of returns warehouse: Slovakia
17. Conclusion

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1. Amazon FBA: What is it? What possibilities, advantages and efforts does it bring you as an online retailer?

What is Amazon FBA?

The abbreviation FBA stands for Fulfillment by Amazon, which translates as Fulfillment / Shipping by Amazon.

As the name suggests, (almost) all logistical processing is handled by Amazon for a fee, in order to simplify sales for traders as much as possible.

This includes the following core services of the FBA programme:

• Storage of the products in a Amazon logistics centre
• Direct shipping of products to customers, also throughout EU Europe and UK
• Taking over customer service and returns processing

However, if you want to use the Amazon marketplace as a retailer, the FBA programme is not the only option.

FBA or FBM?

Once you have made the decision to offer your products on Amazon , you can choose between the following two fulfilment methods, or use both methods at the same time:

• FBA (Fulfillment by Amazon): Shipping by Amazon
  Goods storage and shipping is handled by Amazon
• FBM (Fulfillment by Merchant): Shipping by merchant
  Goods storage and shipping is handled by the merchant – Amazon only offers the trading platform

If a trader uses FBM, he has to take care of all the logistics himself, including returns. In this case, you need your own logistics process, which can take up a lot of time and money for increasing order and shipping volumes.

Question:

Do you want to pack and ship dozens or hundreds of parcels yourself every day? No? That is exactly why many traders deliberately choose the FBA programme.

The Amazon FBA services include storage, packing and shipping of your products, invoicing, customer service and even handling returns.

The essential elements of Amazon FBA fulfilment services and FBA sales benefits

If you register for Amazon FBA, you can benefit from the following advantages in detail:

– Logistics:

As a seller, you send your goods, often directly from the producer, to a logistics centre at Amazon and only have to make sure that your goods are sold. Amazon takes care of shipping to the customer, accepting returns and providing round-the-clock customer service in the national language of the 5 European marketplaces.

– Greater sales potential:

As an FBA participant, you qualify your products for the “Amazon Prime” as well as the “Shipping through Amazon” logo and the “Buybox Priority” (more on this later). This ensures more visibility for your products, a better ranking and ultimately more sales.

– Europe-wide sales:

Amazon FBA offers storage in Germany (European Shipping Network EFN) or optionally abroad (PANEU, Pan-European Shipping). Both programmes make it easier for you to sell throughout the EU and your customers benefit from fast shipping.

– Multi-channel shipping:

If you also sell your goods via your own shop and/or other channels such as Ebay, you can use multi-channel shipping through Amazon . This can save you time, money and staff. This can save you time, money and staff.

Does your FBA business idea have a chance of success? Market and product research!

For a successful launch of your FBA shop, you should carry out careful market and product research in advance. Choosing the right products is the first important step for your FBA business, and also one of the most difficult.

There are various options for deciding which product you want to sell. On the one hand, there are helpful tools that show you the sales potential (e.g. Amalyze), and on the other hand, you can use the sales rankings of Amazon to display successful products. The better the sales rank, the higher the probability of a high turnover.

After the product research, you have now come to the point where you know which product you would like to sell on Amazon . But will you be successful with it? That depends on the following factors:

Competition:

The key here is to question how many providers there already are on Amazon . A simple way to assess the intensity of competition is to look at the number of customer reviews for a product. If there are already many reviews for a product, this usually means that it will be difficult to pass this competitor.

The more suppliers there are for a (similar) product, the smaller the slice of cake you get. However, this should not be an indicator of how big the market potential of your product is. It should only help you to assess whether you have a product with a “unique selling proposition”.

Selling price:

The selling price at Amazon plays a very decisive role. The more expensive a product is compared to competing products, the less attractive it becomes for customers.

As a rule, it is said that the sales price should be at least four to five times higher than the production costs or the purchase price from the supplier, so that the Amazon FBA fees, the Value Added Tax and business taxes as well as your profit margin are covered. In your calculation, also consider the transport costs from the supplier to your warehouse or Amazon’s warehouse.

Patents and certificates:

You should definitely pay attention to these two points if, on the one hand, your product does not yet exist and you would like to have it patented, or, on the other hand, if you need certificates for selling on Amazon . However, this depends on the type of product and the respective regulations on the part of Amazon .

Brand name, logo and packaging design:

With your own brand, a beautiful logo and attractive packaging, you give your product recognition value. This will make your product sell much better. In addition, you avoid that other retailers simply attach themselves to your ASIN (Amazon Standard Identification Number) and use your photos and reviews to win the Buybox with a lower price.

Product Samples:

Before any major product purchase, it is always a good idea to order product samples in advance and check for perfect quality to avoid costly returns or poor quality products.

How much start-up capital should you plan for as a new FBA seller?

Many Amazon traders are faced with the question of how much start-up capital is necessary for the FBA business when launching their FBA career. Unfortunately, there is no fixed amount that can be used to answer this question. As is often the case, it depends on a number of factors, which we would like to explain below in the form of questions.

What is your goal? Do you want to be able to make a living from your Amazon FBA business as quickly as possible, or do you want to build up a second mainstay and grow organically over the years?

If you want to make a lot of sales right from the start, you will need more start-up capital. If, on the other hand, you want to build up your account carefully, you will usually need a rather small initial investment.

Which product will you sell on Amazon ? Is it more of a low-priced product or an expensive product with a high purchase price?

The more you spend on a product in purchasing, the lower your stock will be with limited start-up capital. So that you are not sold out shortly after launch, like many other new FBA retailers, you have to plan your stock well in advance and replenish it as quickly as possible. Bear in mind the long delivery times of up to 10 weeks for delivery by sea.

If your stock is larger from the start, you reduce the risk of “out of stock”, can plan better and react flexibly to market or seasonal fluctuations.

How many products do you want to offer at the same time? The more products you offer, the more likely it is that your turnover will grow quickly, but the higher the amount of start-up capital you need. If you start with just a few products and concentrate on building them up, you will naturally need less investment capital and can add more products to your range later on as your turnover increases and your capital strength grows.

Calculation example:

Let’s assume you start with a hairbrush that you have delivered via Alibaba from a Chinese trader. The purchase price until delivery to the Amazon warehouse is €1.50 including all taxes and customs duties. As a rule, you should have at least 300 – 500 of such a product in stock.

In addition, you will have to pay a one-time fee of approx. 300-500 € for high-quality product photos taken by a photographer. If you only add up the costs for the first product, you have about 1,000 € in start-up capital, which we consider the absolute minimum. If you need a tax consultant and an accounting software, you will of course have to pay extra.

So much for the start-up capital. In the next chapter you will find out what other costs and fees you will have to pay.

4. Amazon FBA costs and fees: You need to factor all of this into your margin.

Can you run your FBA business profitably, maybe even live from it in the long term? To answer this essential question, you have to compare your sales revenue with all the costs and fees that you incur from the production of the goods to the sale and the taxation of your profits.

The one-off costs and requirements for becoming a commercial trader and using Amazon FBA are described in detail in the following chapter.

For the recurring costs and fees for the ongoing Amazon FBA business, we first distinguish between the following three types of costs:

• Costs of the procurement of goods
• Direct FBA costs due to storage, sales fees, shipping and returns
• Indirect costs of FBA use

Thecosts of procuring goods essentially comprise these aspects:

• Production of the goods
• Quality control
• Packing
• Transport from the manufacturer to the Amazon warehouses
• Import sales tax (transitory item, you will be reimbursed in full via the input tax declaration, unless you are a small business).
• Customs duties (usually a few percent of the purchase price, but they vary greatly depending on the product category). As the client, you must pay the customs duties even if the products are delivered directly from the manufacturer to a Amazon warehouse.

Thedirect FBA costs are more diverse than they may appear at first glance. Through Amazon Fulfillment you should expect the following FBA fees and commissions:

• Storage fee in the FBA warehouse per piece of your goods
• Storage fee in the FBA warehouse for the total storage volume (cubic metres)
• Handling charge for manual packing by Amazon
• Labelling by Amazon, can be booked as an optional service
• Shipping costs, depending on weight, dimensions, shipping method and, if applicable, dangerous goods classification.
• Sales commission, calculated by Amazon as a percentage of the sales price, depending on the goods category
• Fees for the return of products (unsaleable products returned to traders by Amazon )
• Basic fee for the professional seller account of currently 39 EUR / month
• For traders with a low turnover of goods (basic account, less than 40 products / month) the monthly fee is waived, but Amazon currently charges 0.99 EUR per product sold in addition to the above fees.

If you know the relevant details of your product, you can use one of the many Amazon FBA calculators online to project the direct costs and fees you will have to pay to Amazon for the FBA services.

However, the FBA calculators do not include the indirect cost factors.

Many traders are often not fully aware of theindirect costs of using FBA . Most people are still aware that retailers have to pay taxes and duties in their home country. However, many FBA sellers have not taken foreign tax obligations into account in their calculations, for example, simply because of the use of FBA warehouses there. Unfortunately, these aspects are hardly ever communicated in an understandable way, even by Amazon.

To make matters worse, the transaction data available internally from Amazon via the Seller Dashboard or downloadable as csv files is often insufficient for traders to get a comprehensive picture of their transactions and any resulting tax obligations.

The indirect costs of FBA use include in particular:

• Of course, the taxation of your profits from the commercial sales activity, the tax rate depends on the amount of the sales or profits or your personal tax rate.
• Value Added Tax-registrations (one-time) in all countries where your goods are stored in Amazon’s FBA warehouses (or shipped internally between them = stock transfer, “intra-community shipment”)
• Regular Value Added Tax reports in all countries where you use foreign FBA warehouses (monthly, quarterly or annually depending on the country and Value Added Tax totals)
• Value Added Tax payments for deliveries abroad if the so-called “delivery threshold”, which will only be very low from 01.07.2021, is exceeded. We will go into this in more detail below.
• Intrastat declarations if you import more than €800,000 worth of goods annually or export more than €500,000 worth of goods within the EU.
• Insurance, if necessary you should take out product liability insurance.

Only if you know and calculate all these types of costs can you estimate how profitable your business will actually be as a Amazon FBA seller.

5. requirements for your FBA business

Trading via Amazon FBA is a commercial activity. Before you can start, you should or must take care of a few things so that you are on the safe side legally and fiscally.

Requirements FBA use
Business account	Create a bank account that you use exclusively for commercial purposes.
Business registration	The registration of your trade must be done at the respective competent authority (where your trade / your company is located).
Tax number	There are various alternatives: The tax office is automatically informed by the business registration and assigns a tax number in the course of this. The tax number does not have to be applied for separately. However, in some cases a tax registration form must be filled out online via the “Elster” portal and sent to the tax office.
EORI number	Companies that export or import goods to or from the EU need an EORI number (Economic Operators Registration and Identification). The EORI number is mandatory for customs clearance. You can apply for it online at customs.
Buy EAN number	You need an EAN number (European Article Number) if you want to trade in products. You must purchase this number, for example from GS1 Germany GmbH.
FBA Seller Account Setup	For registration via Amazon Seller Central you must observe the following requirements:The legal form of your business should already be determined and the business registration should already have taken place. In addition, you will need a valid identity card and must specify your business account. Furthermore, you need a valid credit card (this is only required during registration, the payment option can be adjusted afterwards) and a telephone number.
Amazon Seller Account	Basically, you can choose between two different options for a Amazon seller account. The choice is either a basic account or a professional seller account. The respective costs are described in the previous chapter.

The above points may look elaborate at first glance, but in fact much of it can be done quickly and mostly directly online.

6. sourcing goods for your FBA business

Once you have fulfilled the administrative requirements, successfully carried out your market and product research, and finally decided on a suitable product, you still have to find a suitable manufacturer. You can choose between a manufacturer from Asia or a manufacturer from the EU.

Purchase price

Regardless of the origin of your products, one primary goal should be pursued when procuring goods: To keep the purchase price as low as possible in order to be able to sell the products at a competitive sales price on Amazon in the end. But are low prices enough to satisfy customers 100%? Very probably not.

Quality of goods

For this reason, you should pay close attention to the quality of your product when purchasing it. As already mentioned above, you should have some samples sent to you in advance and check them down to the smallest detail before you finally decide on a manufacturer.

Private label?

Checking the sample is also particularly recommended if you decide to use the private label business model. With private labelling, you give your products your own brand name and in most cases adapt them to the wishes of your target group. This gives your product a completely new USP (Unique Selling Point) and sets you apart from your competitors in the Amazon listings.

Product packaging

The next step in the procurement process is to take care of the product packaging. This is not only about design and protection, but also about the important topic of packaging licensing. As soon as you introduce new packaging, you should license it in every delivery country to which you can or want to deliver via Amazon FBA. The procedure can vary from country to country. The procedure can vary from country to country.

7. FBA expansion abroad: In which European Amazon marketplaces do you want to sell?

At the beginning of your career, as a Amazon FBA retailer you are often faced with the question of whether you should sell on all markets, including foreign markets, and if so, whether you should also store there.

Our clear answer for newcomers to the FBA business is: No!

Build your business organically and carefully in your home market first.

Here you can gather valuable experience about selling with FBA and try to adapt your products to the needs of your customers as best as possible. Ideally, you will be able to collect as many good ratings as possible for your products in your home market.

Good and very good ratings and reviews will later help you to achieve a better ranking and visibility in the product listings in the foreign Amazon markets and thus also to achieve more sales.

The countries in which you later sell in addition to your home market depend on the product and where you see your customers. Does your product have the potential to be sold equally in France or Spain, for example, or do the customers there have other preferences?

So how do you choose the best market?

Number of other suppliers

Analyse your competition in each market and compare prices. If you can keep up with the prices, even though you may be shipping from your home market first, and you have relatively few competitors at the same time, it may be worth selling.

Calculate foreign prices

If you ship from a country other than the recipient country, you will have significantly higher shipping costs compared to local FBA storage. You should take this into account when calculating your price. If you store your goods locally abroad, you save on (international) shipping costs, but then you have to take into account the additional costs for taxation, which can be considerable.

Therefore, compare the advantages of both shipping methods. It can even make sense to consciously decide against FBA and instead opt for in-house shipping when setting up your international business.

Product description / instructions in other languages

Also check if you need additional product descriptions and instructions in other languages for your product. This may also apply to the packaging of the product.

Foreign tax rates for your product

When selling to other EU countries, you do not have to apply German VAT (once the so-called “delivery threshold” has been exceeded, see below for details), but must calculate the applicable VAT rate of the recipient country for your product. This can be quite challenging for some product categories due to the large number of different tax rates in the EU countries.

We have detailed these requirements, and also how to deal with them, in the chapter on invoicing below.

8. storage of your goods at Amazon: domestic, CEE, or PANEU?

Many retailers decide to use the Amazon warehouse as part of the FBA programme. Basically, you have 3 options:

• Storage only in German Amazon warehouses
• Storage also in Polish and Czech warehouses (Amazon calls the CEE programme)
• Storage in all European Amazon warehouses (i.e. at Amazon PANEU)

If you also want to sell your goods abroad, you can certainly do this with your German setup. This means you can ship your products from the German Amazon warehouse. Or you can even ship yourself (FBM, Fulfillment by Merchant), for example when setting up your foreign business, and as long as it only involves a few shipments that you can still handle manually.

What are the CEE and PANEU storage options?

Storage of goods at Amazon in Poland and the Czech Republic (CEE programme) for FBA dealers

Amazon offers you the advantage of the so-called CEE programme (Central European Expansion) that if you release your goods for storage in Poland or the Czech Republic, you save €0.35 on shipping costs per FBA unit shipped (until 07.06.2021 it was still €0.50).

You cannot decide where the goods are stored, as this is determined by Amazon via their logistical algorithm.

Important to know:

If you decide to use this programme, you must register for tax in both countries, strictly speaking already before the first storage. You can find out more about this in the following 9th chapter on foreign tax obligations through FBA warehouse use.

If you use CEE storage for FBA sellers, you (or your tax advisor) need to think about registrations and regular tax reporting in Poland and the Czech Republic.

Storage of your goods on all European Amazon marketplaces (PANEU programme)

If you now sell to other EU countries (Amazon calls them marketplaces), such as:

• France
• Spain
• Italy
• Sweden
• Poland
• Netherlands

you can consider storing your products there on site. This brings you the following advantages:

1. Cost saving due to lower shipping costs, as domestic shipping in each case
2. Faster delivery time due to shorter shipping routes
3. Label your products with the Prime logo on the respective marketplace (Amazon FR, Amazon IT etc.), thereby increasing the likelihood of ordering.
4. Better rankings in the Amazon product listings through the Prime logo

Your products will be stored in the warehouses pre-selected by Amazon . As a trader, you cannot influence where exactly the goods are stored.

Amazon PANEU Storage for FBA merchants: Your products are stored in the warehouses pre-selected by Amazon . As a trader, you cannot influence where exactly the goods are stored. This also gives rise to foreign tax obligations.

In any case, please note that storage abroad automatically leads to tax liability in the respective foreign country and you have to take care of a separate tax number and regular reports.

9. foreign Value Added Tax obligations by using Amazon FBA warehouses

As soon as you, as a Amazon-FBA trader, use a foreign warehouse of Amazon for the storage and shipment of your goods, you are obliged to register for VAT in this country and to submit regular Value Added Tax reports. This applies from the first product – evenif it is only worth a few cents.

For example, if you use the Central Europe Expansion (CEE) programme from Amazon , which allows you to store goods in Germany, Poland and the Czech Republic, you must also register for VAT purposes in these countries.

If you transport your goods between different Amazon warehouses, or if Amazon does this without your intervention, the following reporting obligations arise from a VAT perspective:

• Tax-free intra-Community transfer in the country of departure of the goods
• Intra-Community acquisition in the country of destination of the goods

You “ship” goods from one EU country (e.g. Germany) to another EU country (e.g. Poland), or you have your goods shipped through Amazon . Since all flows of goods in the European Union (EU) must be recorded and documented, especially to prevent the evasion of VAT, there are numerous regulations on this. You can find details in the following blog article: Amazon FBA and Value Added Tax.

It is important to know that you will incur additional costs due to foreign storage:

• Costs for recording and transmitting the data of your foreign deposits and relocations, which you have to report to the respective foreign tax authorities.
• Costs for a tax advisor, who should advise you if necessary on which guidelines are to be observed in the respective country.

You should therefore carefully consider whether or when your foreign turnover is higher than the associated additional costs. You should determine this using the break-even point and preferably only start storing abroad once this point has been reached.

Selection of the Amazon warehouse in the Seller Central Dashboard

You can use the Seller Central Dashboard to select the foreign warehouses in which your products are to be stored. You can find the selection for this under Settings / Shipping through Amazon / Cross-border shipping.

Setting the Amazon storage options for FBA merchants in the Seller Central Dashboard

In the following screenshot you can see how to select the respective bearings individually:

Selection of the individual country-specific Amazon warehouse in the Seller Central Dashboard

So a few clicks to activate the foreign storage options are quickly made, but you now know in any case what the tax consequences can be.

So much for storage.

The following is about sales and we tell you what you should know even before your first sales abroad. After all, it’s no surprise that foreign sales also entail special tax obligations.

10. before your first FBA sale abroad: do you need a foreign tax number?

If you have decided to sell on foreign Amazon markets, you should know what tax obligations this entails.

The point in time is important here. Until 30.06.2021, there are still delivery thresholds for each country, up to which you can create invoices and tax returns with a German Value Added Tax . You can find out how high these delivery thresholds are until 30.06.2021 and when you may need foreign tax numbers until 30.06.2021 in the following blog post: Delivery thresholds and Value Added Tax.

As of 01.07.21, the delivery thresholds in Europe will be completely consolidated to 10,000 euros (net), regardless of where sales are made. From the time you exceed this new delivery threshold, you must therefore theoretically report and pay Value Added Tax for your shipments to foreign end consumers in the respective recipient country.

At the same time, however, from this point on you have the option of submitting and paying for your foreign Value Added Tax declarations collectively at your home location via the so-called “One-Stop-Shop” (OSS) for the EU Value Added Tax .

If you use the OSS procedure, you do not need foreign tax numbers, at least not for cross-border sales to private individuals.

There are no additional costs here, as long as you know exactly where you sold which products and at which tax rate. What exactly the One Stop Shop means and how OSS declarations work is explained below in the chapter on OSS.

11. Amazon Listings, Amazon SEO, Sponsored Products ads, photos and reviews: How to boost the visibility and sales of your products

Unfortunately, good product quality and competitive prices are often not enough to make your Amazon business successful.

The Amazon product listing is of great importance. The position at which your product appears in the listing has a huge influence on your sales. However, you can influence your product listing with various measures and thus actively boost your sales.

Amazon SEO Optimisation

SEO means search engine optimisation, so in the case of Amazon you optimise for the Amazon product search and product listings. In doing so, you should ask yourself one question above all: What is your target group looking for, and with which search terms?

Once you have identified the appropriate search terms or keywords, use them specifically in the headlines and in the product description or on your article page. This increases the chances of getting top positions in the product listings, your “ranking” increases and the probability of sales increases.

In addition, Amazon also takes a lot of factors into account for the placement of your products in the listings that have nothing to do with keywords. Things such as delivery capability, return rate, product ratings and price play an important role here.

In a separate blog post on Amazon SEO, we will soon explain in detail what you should know and use for successful Amazon search optimisation – and why you, as a Amazon FBA seller, already have a significant competitive advantage over FBM merchants.

Sponsored Products and CPC

Another possibility to present your product high up in the product listings are advertising measures in the form of sponsored product ads. These are advertisements that are displayed on a keyword basis and present your products in preferred listing positions for matching search terms. The procedure behind this is called CPC = cost-per-click. You pay for every click that is made on your product ad.

When your ad is shown to a potential customer and they click on it, they are taken directly to your product detail page. With Sponsored Products Ads, you increase the chances that your products will be seen, visited and sold more often.

Product photos

Of course, every good product also needs professionally taken product photos. Amazon has guidelines that you should follow. It makes sense to seek the support of an agency or a graphic designer to ensure that the photos are appealing. Good photos have a positive effect on the customer’s willingness to buy.

Amazon Product reviews and seller ratings

Customer reviews play a crucial role in the success of your products. Amazon tries to make similar products comparable with each other through customer reviews and asks buyers for honest product reviews for all aspects they like or dislike.

But why does Amazon want customers to rate the products?

The essential goal is to make the purchase decision easier for other customers.

The number of customers who read a review before buying is significantly higher compared to customers who only buy based on price decisions, feeling or appearance. Amazon wants to make sure that as many questions of a buying process as possible are answered in advance.

• Does it deliver on the promises made on the product page?
• Is the product of high quality?
• Were other buyers satisfied?
• Is the price/performance ratio right?

These questions, which a buyer asks himself before making a purchase, can be actively incorporated into the buying process. In this way, you can win or lose customers for your product.

Important to know:

There is a significant difference between a Amazon review and a trader rating. While reviews refer to a product, the trader rating makes a statement about the seller himself and has an influence on the overall rating of the seller’s performance.

12. create FBA invoices and keep an eye on sales: Essential for your accounting and tax obligations

You have made all the preparations for the launch of your FBA business, the sale can actually begin. Before that, however, you should deal with the topic of invoicing.

Invoicing and the corresponding posting of the invoices in your financial accounting are of great importance for you as an FBA retailer.

In particular, the invoices must meet certain requirements from a tax law perspective in order to avoid corresponding risks such as overpaid tax or even underpaid tax (tax evasion!).

In practice, invoices are typically not created manually. Amazon FBA sellers usually use one of three methods:

1. Amazon VCS or VCS Lite
2. Invoice tool (e.g. Easybill)
3. ERP system / merchandise management system (e.g. Plentymarkets or JTL)

However, practice shows that the Amazon VAT Calculation Service (VCS) in particular has weaknesses from the point of view of VAT law and thus harbours some risks for you as a trader. A detailed explanation of the functionality and weaknesses of the Amazon VAT Calculation Service can be found here.

The example of Amazon VCS shows that the correct determination of Value Added Tax and the corresponding display on the invoice, especially in cross-border online trade, is a complex issue that should not be underestimated.

It is particularly important to have a quick overview of transactions abroad and to know which VAT liability exists where.

Note on our own behalf:

The Value Added Tax platform of Taxdoo can provide all your sales that you have generated via Amazon FBA (and also, if applicable, via your own online shop, as well as ebay, etc.), as well as the resulting Value Added Tax data, simply and completely up to date at any time. This applies to both domestic and international business.

In addition, we will be able to offer you the possibility of creating invoices for your shipments via our Value Added Tax platform in the course of this year. These automatically contain the correct (foreign) tax rates for each of your products and are generally in line with the EU-wide VAT requirements.

Amazon FBA invoicing and correct tax rates for foreign shipments: Customs tariff numbers help

The tax rate to which a product is subject plays an important role in online trade, especially for the following aspects:

• Display of the correct tax amount and tax rate on the invoice
• Calculation and payment of the correct Value Added Tax within the framework of the VAT returns

From 01.07.2021, the issue of (EU-wide) tax rate determination will become even more important than before. This is because, as already indicated above, due to the abolition of the previously valid local delivery thresholds, most online traders will become liable to pay tax practically from the first parcel in every country of destination to which they send goods to end consumers. Read more about this in the chapter above “Before the first FBA sale abroad: Do you need a foreign tax number for this?

Now you will ask yourself how I am supposed to know which tax rate applies to my products in which EU country? Unfortunately, answering this question is quite complicated, as EU law provides that each Member State determines the tax rate itself within a certain range. Member States can also set different reduced tax rates.

As a result, tax rates vary per country and it can also vary per country whether your product is subject to a reduced tax rate, the standard tax rate or even zero tax.

In practice, the tax rate can be determined with legal certainty using the customs tariff number . The customs tariff number is the only unique feature throughout the EU to determine the tax rate of a product in each country. With the help of the customs tariff number, every product can be classified worldwide, so that an automated determination of the tax rates – via corresponding databases – is also possible.

Note to self:

Learn in one of our live demos how you can automatically determine the tax rate of your products in the dashboard of our onlineValue Added Tax platform.

An important note for all users of the Amazon VCS: The Amazon VCS will always apply the standard tax rate of the respective EU country. This can be problematic if you sell products that may be subject to a reduced tax rate.

If you sell products that are taxed at a reduced rate, you must classify these products using the product tax codes provided by Amazon . However, these are not official classifications, so this classification is not legally binding. However, these are not official classifications, so this classification is not legally binding.

13. Amazon FBA and Value Added Tax obligations in your home location (e.g. Germany)

The Value Added Tax obligations in your home location start with the fact that you have to register for tax at the tax office of your company location before you start your business activity.

You then inform the tax office regularly about your incoming and outgoing sales. You can have the Value Added Tax from incoming invoices refunded (input tax deduction). At the same time, you must declare and pay the Value Added Tax from your sales.

Both are done via the so-called Value Added Tax advance returns, which you can submit electronically either monthly or quarterly (as determined by the tax office), e.g. via the Elster portal.

Note: Intrastat declarations

If shipments to other EU states with a value of more than EUR 500,000 or receipts from other EU states with a value of more than EUR 800,000 per year are recorded, Intrastat declarations must be submitted in addition to the aforementioned VAT declarations.

You can read more about Intrastat here: https://blog.taxdoo.com/intrastat/.

Do you need a special Amazon FBA tax advisor?

The tax obligations associated with Amazon FBA sales can be quite complex, especially if foreign warehouses are used and/or deliveries are sent abroad.

Not all tax advisors are specialised in the special tax features of (cross-border) online trade. In this respect, it may be advisable to look for genuine e-commerce expertise when choosing your tax advisor. We have summarised what you should look out for, especially as an FBA seller, in the following blog post: Finding an e-commerce tax advisor.

If you have difficulties finding an appropriate expert, please feel free to contact us. Hundreds of tax advisors from practically all German postcode areas, and also from other EU countries, work successfully with us for their clients from the online trade.

We will be happy to put you in touch with suitable tax advisors.

15. Amazon Report FBA sales via the One Stop Shop (OSS)

On 01.07.2021, a fundamental VAT reform for online trade will come into force. One of the significant changes is the extensive abolition of local delivery thresholds for cross-border sales to private customers. These delivery thresholds were previously intended to protect small and medium-sized enterprises in the EU from becoming liable to tax in the receiving country from the very first euro of turnover.

This protection against tax liability in the receiving country will now de facto cease to apply to so-called “distance sales” (= cross-border supplies to private individuals) from 01.07.2021, as there will only be an EU-wide supply threshold of 10,000 euros (net).

If this EU-wide delivery threshold is exceeded, the turnover is taxable in the receiving country. Many FBA traders will quickly reach this threshold.

Without a “simplification rule”, this would mean that from 01.07.2021 you would have to register for VAT in every Member State to which you send even one parcel and also submit regular Value Added Tax returns.

However, the tax authorities do not actually want to impose this effort on online traders.

Therefore, the EU VAT reform also includes the introduction of the One-Stop-Shop procedure. The One-Stop-Shop or OSS procedure is a special taxation procedure that you can use to centrally report all your cross-border distance sales.

In concrete terms, this means that you can not only report the turnover from your distance sales in the various EU Member States to a state-run online platform as a “one-stop shop” (this is the translation of “One Stop Shop”) in your home country, but also pay the accumulated tax debt there.

This allows you to avoid local VAT registration in the different EU Member States due to your B2C distance sales and instead use the One-Stop-Shop procedure to declare these sales and resulting taxes.

Important to know:

Note that the One-Stop-Shop can only be used to report B2C cross-border distance sales. Tax transactions arising from the use of foreign warehouses with the intra-Community transfers or intra-Community acquisitions already mentioned above can still be reported exclusively via local VAT registrations. Here, therefore, the One-Stop-Shop procedure will not lead to any change.

What does that mean for you in concrete terms?

• You still need local VAT registrations in the EU countries where you store your goods.
• You still need a compliance platform, such as Taxdoo, to conveniently and securely fulfil your comprehensive VAT obligations both domestically and abroad.

Complex, but easily doable with the right support: Tax returns for distance sales can be done via the OSS in your home country. If you use warehouses in other EU countries, you have to file parallel declarations / registrations with the foreign tax authorities. Sales from your home country to your home country must be reported to the local tax office.

Tip: There are also some pitfalls to be aware of in connection with the new One-Stop-Shop, especially for Amazon FBA retailers. Read more about this in our knowledge pool on OSS.

16. special case of returns warehouse: no tax obligations

After so much information about the various types of tax and tax obligations around FBA, the good news is that Amazon’s returns handling does not lead to further tax obligations.

Since 2017, returns from Europe have been processed centrally at the Amazon returns warehouse in Slovakia. This means that no goods are sold from this warehouse, only returns are processed. As a result, the storage of goods in Slovakia is also limited in time. They are returned after a short period.

This pure returns handling does not lead to a tax liability for you as an FBA seller in Slovakia. If you are interested in the background, you can find out more here.

17 Conclusion: Amazon FBA offers enormous opportunities, but is also associated with effort.

You now know which options are open to you as a (future) FBA seller to build or expand your own e-commerce presence. And you know what expenses you should expect.

With good preparation and knowledge of the administrative duties – and their solutions – nothing stands in the way of the successful launch of your FBA career.

The Taxdoo solution: Automated Value Added Tax compliance

Value Added Tax- Duties for FBA traders are either time-consuming (if you want to keep track yourself) or expensive (if all activities are taken over manually by the tax advisor). But there is a smart solution.

Taxdoo automates the required VAT processes within the framework of Amazon FBA.

Taxdoo can automatically read raw data from marketplaces (e.g. Amazon), ERP systems (e.g. Afterbuy, Billbee, Plentymarkets, JTL or Xentral) and shop systems (e.g. Shopify) and use this to

• Createaccounting exports (Datev & Co.),
• report your sales abroad,
• Compiledata for OSS messages completely,
• complete tax registrations in other EU countries
• document shipments, and
• much more.

For each product and each EU state, Taxdoo can also automatically determine the correct (possibly also reduced) tax rate.

For tax obligations in other EU countries, all VAT-relevant reports can be automatically taken over from 79 euros per month and per EU country: from one source through Taxdoo.

Simply click here and arrange a 1:1 live demo in which we will be happy to show you and/or your tax advisor the advantages of our automated Value Added Tax platform in person and answer your questions.