How to calculate VAT from your selling price on Amazon
August 2018

How to calculate VAT from your selling price on Amazon

UK Accountants for Amazon FBA Sellers

As UK based accountants that specialise in working with Amazon Sellers, we get handfuls of VAT questions every day. This brief article takes a quick look at how an Amazon Seller can quickly calculate how much VAT they should be collecting from customers by using their final sales price.

If you want to learn more about the basics VAT for Amazon Sellers you should read this article here.

Amazon VAT Problem

One problem that eBay and Amazon Sellers face is that when they list their products they only display their final sales price to the customer (although this has changed slightly with the introduction of Amazon for Business and Amazon VAT calculation services).

For example, if a product is listed as £10 on Amazon, then the seller does not necessarily have the ability to charge £10 + VAT. All the Amazon or eBay Seller can see is the price that they want to charge the customer.

Solution

In these circumstances, if you want to calculate how much of your sales margin is actually VAT then all you need to do is divide your final sales price by 6.

For example:

Let’s help you visualise the formula by looking at the example of selling a product for £10 + VAT.

£10 + VAT = £12

Therefore we know that in this example VAT the being charged = £2 (since 20% of £10 = £2). Obviously, this is easy, all you need to do is add 20% and you have the VAT, but what do you do if you sell the product for £12, how do you calculate how much VAT you are charging if you do not know how much VAT was added in the first place?

Simple: Divide the sales price by 6.

Again if we use this example of a £12 sales price. Divide 12 by 6 and what do you get… 2!

Therefore you should hopefully see that by using the simple formula (Sales Price/6 = VAT) that the unknown VAT amount within a gross sales price can always be calculated (assuming that the VAT rate is 20%) by dividing your sales price on Amazon by 6.

Amazon VAT Accountants

We are accountants that work with Amazon FBA Sellers from all around the world. We help keep Amazon Sellers VAT compliant. If you are an Amazon Seller and you are looking for help with VAT then get in touch with us today.

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