This is quite a specific case, but it would appear that if you sign up to use Amazon VAT Calculation Services, have your products in FBA, get a return request and the item is refunded by Amazon but the return not received, then when Amazon reimburse you the refund will be net of VAT.
What triggers the error?
You may encounter this error if you have signed up to Amazon VAT Calculation Services and go on to sell an FBA product for which a return request is generated and then the product never returned or goes missing in transit. Your Amazon account will appear to balance, but if you did deeper you’ll discover the missing VAT when the refunded amount is reimbursed.
Amazon VAT Calculation Services Missing VAT Example
- You make a £600 sale (£500 plus £100 VAT) and the item is shipped from FBA
- The customer requests a return and immediately the £600 sale price is removed from your Amazon seller account
- For whatever reason, the return is never completed and Amazon issues a reimbursement but only for £500 (ex VAT)
How do you account for the missing VAT?
Put aside the fact that your cash flow is out by the VAT amount until you can correct your accounts, the sellers we’ve spoken to have no idea as to how they should account for the missing VAT on their VAT returns. Having consulted specialist Tax Advisors they have also been unable to suggest an accounting method to handle the missing VAT.
Sellers have raised this situation with Amazon who have stonewalled and (perhaps unsurprisingly as this is a relatively new edge case and quite complicated) been unable to offer a resolution or explain why the VAT discrepancies are occurring.
If you are using Amazon VAT Calculation Services and have had returns which were reimbursed, it may be worth checking your accounts to see if you too have missing VAT on reimbursements.
The only solution currently available would appear to be turning off Amazon VAT Calculation Services and providing your own VAT invoices upon request.