This is an interesting new horizon relevant to marketplace retailers. In the USA, Washington state in particular, Amazon will be required to collect sales tax on behalf of the State government from the start of 2018.
Amazon has introduced the Marketplace Tax Collection service to automatically collect and remit sales tax on behalf of third-party sellers. And Washington state will be the first to use the service starting on January 1st 2018 when the new internet sales tax law comes into force.
As CNBC says of the change and explains the significance: “This is new territory for Amazon, which to date has charged sales tax on products it sells directly to consumers while leaving it up to sellers on the platform to handle their own tax collection. Those transactions only require a tax if the merchant has a physical presence in the state of the buyer.
Washington is removing that loophole and saying that all internet sales get taxed. Now, if an electronics retailer in Cleveland sells a TV to a customer in Seattle, Amazon will handle the relevant tax collection and payment, regardless of the location of the sender or the fulfillment center.”
And it is likely that this system will spread in the USA with more states putting pressure on third party-sellers to collect sales tax via Amazon. It will be interesting to see how it develops Stateside.
This development will also be of interest to marketplace sellers in the UK who are concerned about overseas sellers who are evading and avoiding their UK tax responsibilities. With specific reference to VAT, there are many who are worried that sellers from outside the EU (specifically from China) aren’t paying their way.
This change, with Amazon directly collecting taxes on behalf of the state, is a big deal and will make many wonder why HMRC isn’t ordering Amazon and eBay and the rest to do the same in the UK.
4 Responses
Ref Amazon USA how will that affect UK sellers? I am selling on Amazon USA FBA and was about to start a process of registering in each State and using Taxjar to pay the tax will I still have to do that? I want to fulfill my legal obligations but am a little confused now.
Hopefully HMRC will take note and start collecting tax at source from Amazon and Ebay which is the only way to guarantee a level playing field for all. Instead we have another government parliamentary committee meeting again in two years time, who will shock horror find that the problem has got worse, not better, that sending letters to China based sellers did very little to ensure tax compliance. In austerity Britain, you would think that the government would we doing all they can to ensure that the correct and full amount of tax is collected at source. It seems HMRC and MPs don’t seem to care about this (presumably as any significant funds they hold are sitting abroad offshore untaxed anyway!!!!)
How will this affect UK sellers who sell into the US and who stock and fulfill orders from the UK?
It would be a pain up the *** if they did that here.
The VAT quarter is enough hassle without having to split sales into sales with VAT on that you’ve collected, and sales that ebay/amazon have collected VAT on.
Just get rid of VAT and put it on one of the other taxes. It’s the poor that pay the most under VAT.