2% Amazon Fee Increase as they pass Digital Services Tax to UK SMEs

2% Amazon Fee Increase as they pass 2% Digital Services Tax to UK SMEs Amazon Fee Changes

Amazon have announced that you will be paying the Digital Services Tax levied on Amazon by the UK Government. Your fees will rise by 2% from the 1st of September. Kindly, although the Digital Services Tax applies to revenue earned from the 1st of April 2020, Amazon won’t back date the passing the tax on to you and won’t ask you to cough up for the first five months.

The Digital Services Tax is levied on the revenues of search engines, social media services and online marketplaces which derive value from UK users. It’s a response to businesses which are domiciled overseas and operate paying less that what is perceived as their fair share of tax based on their revenue generated from their UK operations. The Government describes this as a misalignment between the place where profits are taxed and the place where value is created.

“Under the current international tax framework, the value businesses derive from user participation is not taken into account when allocating the profits of business between different countries. This measure will ensure the large multinational businesses in-scope make a fair contribution to supporting vital public services.”
– HM Revenue & Customs

Amazon are one of the large multi-national enterprises with revenue derived from the provision of an online marketplace to UK users and so are paying the new tax. However, whilst they’ll have to pay the tax on their own services and sales revenues in the UK, they have no intention of paying it on the revenues they generate from you so they’ll be stinging you in additional fees. Naturally this will almost certainly result in price increases and the consumer is ultimately the real loser.

This is of course the exact opposite of the UK government’s intentions. They intended a tax on large overseas businesses making billions in revenue and profits, not a tax on hard working small businesses struggling to make a living. Amazon passing the Digital Services Tax on to you as a merchant is exactly the reason that we believe the proposed 2% UK online sales tax is also a terrible idea… Amazon won’t pay it but you will. If the UK online sales tax comes in then, combined with the Digital Services Tax, your fees will see a total rise of 4% within a year.

“Earlier this spring, the UK government introduced a Digital Services Tax . While the legislation was being passed, and as we continued our discussions with the government to encourage them to take an approach that would not impact our selling partners, we absorbed this increase.

Now that the legislation has passed, we want to inform you that we will be increasing Referral fees, Fulfilment by Amazon (FBA) fees, monthly FBA storage fees and Multichannel Fulfilment (MCF) fees by 2% in the UK to reflect this additional cost. We will not apply the increased charges retroactively, but starting 1 September 2020, the fee types listed above will increase.”
– Amazon

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Ah well, it's Amazon. Put the prices up. Buyers will carry on buying regardless.

Gav • 4th August 2020 •

Is this something that has just been announced? I have not heard of this and we certainly don't have another 2% in our margin to give to Amazon. We would certainly have to re-consider listiing on Amazon or just increase our prices by that 2%.

Darren • 4th August 2020 •

Not 2% margin. 2% fee increase. They'll add 2% to your invoice

Chris Dawson • 4th August 2020 •

Thanks for the quick response Chris. Phew, I think I jumped the gun a bit wth that one. 2% on fees I can deal with.... and lets be honest there does need to be something digital done for the international companies doing huge volume.

Darren • 4th August 2020 •

Taxing digital giants is supposed to tax their profits.... not be a tax to pass on to the little guys!

Chris Dawson • 4th August 2020 •

VAT fraud , fake brands, foriegn traders, fake reviews, and counterfeit products and this is all policy makers managed. It's a disgrace.

Ifellow • 4th August 2020 •

Chris, can you clarify, as the way it is worded here isn't clear. The article seems to say fees will go up 2%, eg. 10% fees will now be 12%. But then in the comments you say they'll add it to the invoice, which is different. That would be adding 2% of 10% which would effectively mean 10% fees would go up to 10.2%, or to put it another way: £100 of sales. Old fee rate 10% = £10. New fee rate 12% = £12 or £100 of sales at fee rate of 10% = £10 + 2% of that £10 = another 20p I think I know which, but you seem to be saying another to Darren.

Gav • 4th August 2020 •

It's 2% of the fee, so 10% will become 10.2%, or 20p in you example if £100 of sales

Matt • 5th August 2020 •

thanks Matt, North Crystal The official email arrived from Amazon overnight, which explained it with examples. I actually thought it was the other way round. Given that one of the categories I list in got hiked from 12% to 15% earlier this year, I could see them sticking it up to 17% like it was no big deal. Still worth going through the listings and reviewing prices, maybe tweaking them up a little.

Gav • 5th August 2020 •

20p or 30p per sale might not sound like much. Now go check how much you paid Amazon over the post 12 months and divide the total by 50. That's how much its going to cost you. As an example just on referral fees of 15% with 50k/month sales you will pay an additional £1800 per year. Use FBA and other services and it will be even more! £150 a month out of your pocket isn't any fun!

Chris Dawson • 5th August 2020 •

"...For example, on an item for which the referral fee on Amazon.co.uk is currently 15.0%, you will pay a fee of 15.3%..." Just take your current % fee and multiply by 2%. Pure magic! Lol 69% * 0.02 = 1.38 + 69 = 70.38%

NorthCrystal • 5th August 2020 •

If the Government's intention was to tax the big companies, like Amazon, to secure a share of their UK profits, they have failed. Just like Trump's tariffs on Chinese imports, the 'tax' will be paid by Amazon's retailers and, inevitably, by the buying public. Congratulations to the UK Government, ... you have managed to introduce a new tax on ecommerce whilst preserving Amazon's profitablity.

Andrew Owen-Price • 5th August 2020 •

Well, they can "congratulate" themself now and move on to more important issues... like giving multi million contracts without any legal tender to their mates....

NorthCrystal • 5th August 2020 •

Will just creep my minimum pricing up so the customers pay for this new tax

Freddy • 5th August 2020 •

Chris I think the point is being completely missed in this article. My points are - Amazon will of course pass the fees on if they feel they can stay competitive. - Increasing Amazon fees is a good thing for competition. For example it allows my website to compete on price (it could anyway as prices on Amazon are crazy high) - This is the best way to extract a contribution to our society from the large, international businesses, in such a complex area of tax. - It's the same for all sellers - If a consumer doesn't like the price on Amazon they will purchase elsewhere - That's a good thing as it decentralises power over the sector.

Nick Whitehead • 5th August 2020 •

I have to disagree here... "Amazon will of course pass the fees"... it's not fees, it's a tax. The Digital Services Tax was designed to be imposed on the revenues of large multi-national businesses with worldwide revenues over £500 million with over £25 million revenue derived from UK users. It is not supposed to be a tax on small businesses but that's who Amazon are going to make pay. There's also an allowance that the first £25 million of revenues derived from UK users will not be subject to the tax - small businesses won't get a share of that allowance but Amazon will.

Chris Dawson • 5th August 2020 •

The best way would be to use digital sales to collect VAT a point of sale and close the clearly and many loopholes that have been exploited for years. As well as pass liability to those accounting companies that promote such loopholes as legal. This is just hogwash.

ifellow • 5th August 2020 •

Chris, your comments suggest there is no connection between Sale price, overheads, tax, net profit - They are all connected. Also Amazon's reaction will make them pay even more tax - 2% on the 2% (Tiny I know) Consumers always pay - That is just the way it is and it's each company's consideration to balance net profit against competition which really determines a Sale price. Amazon have now been made less competitive at the same time of collecting a lot of money for public services. This moves ultimately seeks to make Amazon less competitive by either less retention of profit OR higher sale price. Market forces will work it out. Your final point - 2% of £25m is £500k which is a pin prick to all sellers once distributed. Overall this is a Good tax, in a complex area, and will funnel money into the public pursue All said, I'm glad you raised this article.

Nick Whitehead • 6th August 2020 •

So, I'm guessing the oversees sellers will avoid this increase?

Sum Fairness • 5th August 2020 •

This is supposed to be a TAX that Amazon etc pay to offset the TAXES they don't pay now. Instead, they pass it on to their sellers [naturally] who have the "option" to add it to their prices. Except that most won't as they have to say competitive. Once again, government misses its target by a country mile.

StigD • 5th August 2020 •

Ebay will do the same. The customers will have to pay, we are already preparing to adjust our amazon pricing. Only lunatics will absorb the increase. Margin must be preserved.

PAUL S • 5th August 2020 •

ebay.co.uk moved from being luxembourg based to UK based some time ago, so shouldn't be included.

Gav • 5th August 2020 •

On the amount of Amazon fees +FBA that I paid last year on an Amazon turnover of €850k, it'll be nothing. But that's not the point. The point is Amazon are still avoiding a tax on more than 50% of their UK sales and effectively they know that in most cases, because of the cut throat nature of Amazon pricing and the scramble to win the buybox, where pence count, third party traders will not and cannot alter prices.

Chris • 5th August 2020 •

Don't forget though that Amazon will have to pay 2% tax on everything they sell on the UK website so whilst it may mean that we have to pay an extra 30p on a £100 sale, Amazon are going to have to pay £2.00 on any sales they make. As their own sales make up approx 50% of the .co.uk sites sales they are going to have to fund a reasonable amount our of their own pocket. Having said that, I do believe that the UK government should have looked at what they did with raising their fees in France and banned them from doing this is the UK.

Steve • 5th August 2020 •

High turnover without maintaining margins is ridiculous, you are just a busy fool. Anyone can get can get a high turnover. Only profit matters.

PAUL S • 5th August 2020 •