Disclaimer: The team at LMB are happy to provide users with technical assistance in applying tax rules to their LMB setup.  We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice.  We highly recommend that users seek advice from qualified accountants for their tax compliance.

Amazon offer a service called the VAT Calculation service on their EU seller accounts. For most sellers it is enabled automatically once they have input their VAT number into seller central. You can check if it is active on your seller account here:
https://sellercentral.amazon.co.uk/gc/amazon-business/tax-settings

If you have the Amazon VAT Calculation Service turned on, your sales are having VAT calculated by Amazon and charged to the customer, then reported as separate transaction lines in the settlement report.

The settlement reports Link My Books receives from Amazon will show sales revenue as two separate line items:
- Net Amount
- Tax Amount

Can I choose to merge the Net and VAT lines back into one line?

Yes, for accounts added after 15th May 2020 this will be the default setting. If you joined before then please get in touch with support and we can action this change for you as older accounts will have the Net and VAT lines separated by default.

What happens if I choose to keep the Net and VAT lines separate?

If you choose not to merge the Net and VAT lines the following will happen:

Scenario 1: Amazon's VAT calculation service is turned on

With the VAT calculation service enabled, on an example £12.00 Sale you will see:

£10.00 Amazon Sales - Principal (Net)
£2.00 Amazon Sales - VAT

We treat the Net amount and the VAT amount as tax inclusive amounts and apply the 20% VAT rate as follows:

£10.00 Amazon Sales - Principal (Net) (where the amount is VAT inclusive)
£2.00 Amazon Sales - VAT (where the amount is VAT inclusive)

When we apply 20% VAT to those VAT inclusive figures above you get:

£1.67 VAT on the principal line
£0.33 VAT on the "VAT" line

So the total VAT is still £2.00 meaning the VAT amount is correct. 

Scenario 2: Amazon's VAT calculation service is turned off

Amazon’s VAT Calculation Service is turned off.

Sales on Amazon are not having VAT calculated by Amazon and are already reported as single transaction line in the settlement report.

With the VAT calculation service disabled, on an example £12.00 Sale you will see:

£12.00 Amazon Sales - Principal (Gross)

When we apply 20% VAT to this VAT inclusive figure above you get:

£2.00 VAT on the principal line

So the total VAT is still £2.00 meaning the VAT amount is correct. 

Please note the following information regarding the Amazon VAT Calculation service:

The Amazon Calculation Service relies on you configuring the correct tax types for your products, if you get these wrong your VAT will be under collected (or over collected) and this can have an impact on your VAT return. It's vital you review your Amazon tax configuration with your tax adviser.

If you have more than one VAT rate due to having different types of products that are standard rate, reduced rate or exempt from VAT then you can use the Product Groups feature within LMB to apply different VAT rates to groups of products.

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