This article explains how Link My Books intelligently groups your products into key VAT categories (Standard, Reduced, Zero Rated) based on the tax data from your sales channels. This feature is automatically enabled for Amazon and Shopify accounts connected to Link My Books after 2nd May 2023 (when you completed the Accounts & Taxes wizard).
Important Note: For Accounts Set Up Before 2nd May 2023
If your Link My Books account was set up before 2nd May 2023, you had the choice to turn on product grouping and automated product grouping during the initial Accounts & Taxes wizard.
If you are unsure whether these settings are active or configured correctly for your account, we suggest you first go back through the Accounts & Taxes wizard (accessible via the Accounts & Taxes menu in Link My Books). If you still have any questions after reviewing the wizard, please contact our support team.
1. Automatic Grouping for Amazon Accounts
For Amazon accounts, Link My Books uses your Amazon Product Tax Codes (PTCs) to correctly group your products for VAT purposes. Your primary responsibility is to ensure your products are accurately set up on Amazon with the correct PTCs.
What is an Amazon Product Tax Code (PTC)?
A Product Tax Code (PTC) is an Amazon-defined code that specifies the correct set of VAT rates across the EU and UK for a particular product category.
Default PTC: By default, the PTC "A_GEN_STANDARD" is often set for all products, applying the standard rate of VAT in all taxable jurisdictions.
Purpose: Amazon's VAT Calculation Service and VAT Services on Amazon utilise PTCs to determine the appropriate VAT rate to apply to sales and refunds.
You can find a list of VAT rates and valid PTCs on the "VAT Rates and My PTCs" help page within Amazon Seller Central.
How Amazon Automatic Product Grouping Works (Process Flow)
The process ensures your Amazon settlements are accurately categorised for VAT before being sent to your accounting software:
Amazon Issues Payout: You receive a payout from Amazon.
LMB Fetches Settlement: After 12-48 hours, Amazon makes the settlement report available via its API, and Link My Books fetches it.
Awaiting VAT Data: The settlement is initially marked as 'Awaiting VAT Data'.
PTC Check: Link My Books downloads Amazon's VAT reports (either the VAT Calculation report or the VAT Transactions report) and checks the PTC for each product sold or refunded within the settlement.
We prioritise the VAT Calculation report (available 2-4 days after payout) if you have Amazon's VAT Calculation service turned on.
Product Grouping: Products are then automatically grouped according to their assigned PTC into Standard, Reduced, or Zero-Rated Product groups.
Settlement Processing: The settlement is processed using the VAT report data and the updated product groupings.
Ready to Send: The settlement is marked as 'Ready to Send' to your accounting software (Xero or QuickBooks).
💡 Quick Tip: Temporary Grouping Display
During the brief period between Link My Books receiving your settlement report and it being marked as 'Ready to Send', you might temporarily see products categorised in unexpected product groups. Don't worry! Once the settlement is fully processed, all products will have been correctly re-grouped based on their Amazon Product Tax Codes.
What to Do if Your Amazon Product Tax Codes Are Wrong
If your PTCs are incorrect on Amazon, Link My Books will not be able to accurately group your products or apply the correct tax rate. You should update your PTCs on Amazon, and from that point onwards, any new settlements will be processed correctly.
💡 Quick Tip: Correcting Past Data (Amazon)
If you need to send older settlements to Xero or QuickBooks where the PTCs were previously wrong on Amazon, you will need to manually check and update the product groupings for those specific settlements on the Inventory > Product Groups page in Link My Books. You may also need to Rollback and re-send these settlements after making corrections.
How do I update my Product Tax Codes on Amazon?
A PTC can be assigned at the item and/or default level in Amazon Seller Central.
1. Default Level PTC: Applies to all your products unless overridden.
To view or edit: Go to Settings > Account Info > VAT calculation settings > Continue to page 3, VAT defaults. View/change and Save settings.
2. Item Level PTC: Designates a specific PTC to a single listing, overriding the default.
To view or edit: Go to Manage Inventory > Edit for the product > Offer tab > Tax Code field. Assign PTC and Save and finish.
Additional Tools: Use Inventory File Upload for bulk edits, Add a Product tool for new listings, or refer to Amazon documentation for flat file/XML overrides, refer to page 5 here. Updates typically take 5-48 hours.
2. Automatic Grouping for Shopify Accounts
For Shopify accounts connected to Link My Books after 2nd May 2023, automatic product grouping for VAT purposes is also enabled by default. Shopify's tax logic differs from Amazon's PTCs.
How Shopify Handles Tax Data
Shopify calculates tax on each order and line item based on your store's tax settings, product taxability settings (e.g., "Charge tax on this product"), and the customer's shipping address.
How Link My Books Integrates with Shopify Tax
Link My Books reads the tax amounts calculated and applied by Shopify for each product within every order. Based on these calculated tax rates per line item, Link My Books then automatically groups your Shopify sales revenue into the appropriate VAT categories (Standard, Reduced, Zero Rated Product groups).
What to Do if Your Shopify VAT Rates Are Wrong
If the VAT rates on your Shopify settlements appear incorrect in Link My Books, the issue likely lies with your tax setup within Shopify itself.
Verify Shopify Tax Settings:
Go to Settings > Taxes and duties in your Shopify admin.
Check your general tax regions, rates, and any specific tax overrides you have configured.
Ensure your product-level tax settings are correct (e.g., individual products marked as taxable/non-taxable, or assigned to specific tax overrides).
Review Product Tax Status: For individual products, ensure they are correctly marked as taxable or non-taxable, and that any custom tax rules are applied as intended.
💡 Quick Tip: Correcting Past Data (Shopify)
If you need to send older Shopify settlements to Xero or QuickBooks where the tax rates were previously incorrect within Shopify, you will need to manually check and update the product groupings for those specific settlements on the Inventory > Product Groups page in Link My Books. You may also need to Rollback and re-send these settlements after making corrections.
If you have any questions about this article or feedback on how we could make it better please reach out to the support team via the blue chat icon on the bottom right of the page or via email to [email protected].