One Stop Shop: The biggest tax issues for Amazon sellers 2022

9. December 2021

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one stop shop hurdles spacegoats

When you haven’t heard of the term “one stop shop” yet, here’s your chance to do so. We hope you are also ready for some problems and hurdles that come along with the whole tax topic.

If there is one topic in the world that makes most people fall asleep or just creep out: It’s taxes. But we all have to care about them. And if we don’t do that, we face big tax issues and general problems. 

That is especially the case for international Amazon sellers. 

Now we will go into detail and figure out together which problems and hurdles there are and what this term is all about. But at first, we want to present you your duties as a seller. So, stay tuned!

Duties as an Amazon seller 

In your domicile state you have to face some tax issues at first before you can lean back and enjoy your life as a seller. 

As soon as you sell products via Amazon as a merchant, you are seen as an entrepreneur and need to pay taxes. This comes with problems and hurdles, especially if you haven’t heard yet of any tax rules. 

The first of your hurdles will be to register as an entrepreneur for sales tax issues. Then you have to regularly submit sales tax returns. We are sorry to say, but there are more problems. Because you also have to submit an annual income tax return. 

Tax issues you need to face

From a tax perspective, there are plenty of hurdles and problems, also when it comes to reducing costs in online retailing. The reason for this: the tax law holds a lot of pitfalls for online merchants. 

Amazon merchants need to consider that Amazon will charge a fee of 2.9 percent of the sales tax. The merchants are responsible for getting a tax ID. Then the merchant has to add the tax numbers to their support and assign each of their listings with a tax code. As a result the products are taxed. 

In addition, you have to pay the sales tax and the income tax regularly. If you forget you will face tax issues like delay surcharge.

But we also have some good news: The income tax remain simple. That means, even if a company expands internationally, the income tax is exclusively taxed by Germany. 

But the situation is a bit different concerning sales tax. For online merchants it does not matter where the company is registered. It only matters the location from which the goods are sent to the customer. 

Enough with problems and hurdles…?

This basic rule, according to which sales tax for mail-order companies is always payable in the country where the goods are stored, is simple and, in many cases, practical.

For online retailers, however, this basic rule can have unexpected sales tax issues that are often overlooked in traditional accounting and tax consulting. So this is another of the many hurdles for online retailers. 

Moreover, another of the many problems and hurdles will be the tracking of the VAT payment load for each country and that there is enough cash on the account at the time of the payment.

So, actually the one stop shop should be a facilitator for companies that shop products from a warehouse to EU states to the customer. Therefore, it should make the tax issues a bit more bearable. 

Now we come to the big question: Does the one stop shop really fulfill its promises?

The one stop shop 

It almost sounds like a tongue twister, but it’s in fact an important point when it comes to tax issues. Since July in 2021 the one stop shop scheme is part of the EU VAT reform for e-commerce. 

But what does the one stop shop mean for you as an Amazon seller?

Within the one stop shop, it is all about the administration and preparation of the data and data provision for the German tax advisor. 

This already sounds really complicating, but we will explain the one stop shop and everything that is connected with it step for step.

In Germany, for example, you have to pay your taxes regularly; and your German tax advisor needs your data to do the tax return. 

SPACEGOATS tip: as an Amazon seller, it is really advisable to hire a tax advisor if you have not had any experience in this area yet. Otherwise, you may face many tax issues, general hurdles or other problems.

Now, we want to show you the most important facts about the one stop shop: It’s like a platform provided in Germany by the Federal Central Tax Office and is intended as a single point of contact. The goal: To ensure VAT compliance. And furthermore it is not mandatory.

That means that online merchants who have to pay taxes in other EU countries due to their cross-border sales can report their sales collectively with one stop shop.

So far so good, but we will come back later to the problems and hurdles concerning the one stop shop.

And how was the situation with the one stop shop until July 2021? 

Up to this point, country-specific delivery thresholds of 35,000 Euro (average value) applied to distance sales in the EU. If the turnover was below this value, sellers got nothing to do. 

However, if a seller has exceeded this amount, he or she has to register for VAT, obtain an identification number and pay their taxes in the respective country. So, up to now, Amazon merchants had to endure many tax issues and also high costs. 

Until July 2021, the Mini one stop shop (MOSS) existed as an electronic method to pay VAT in a single Member state. But that was only reserved for service providers, for example in telecommunications field. 

The “positive” change has come…?

These hurdles should be changed with the introduction of the one stop shop in July 2021. The standards of this scheme have an effect on delivery thresholds, taxation of goods sold in distance sales, obligation to register for VAT and the deduction of VAT. 

Now this one stop shop scheme was extended to all businesses to consumer services in the EU member states where the supplies are not established. And brought a Europe-wide threshold of 10,000 Euro. 

The biggest change that the one stop shop brought is that the old thresholds for distances sales have been put an end to. That means that only EU companies will continue to have EU-wide 10,000 Euro remote sales threshold. 

And the consequence: You don’t have to register for a VAT number in countries to which you deliver but where you do not store any product. 

At first, this sounds like a huge simplification for retailers because the VAT reports can be handled centrally for EU countries via one stop shop of the country in which they are based. 

But as good as it sounds, the one stop shop means a lot more costs and effort for the online merchants. Additionally, it also brings some risks because the declaration has to be submitted manually in the online portal. Merchants have to prepare their data structure for reporting and differentiate into transactions. 

Furthermore, the technology is not as advanced as it should be. Because: For whom does the one stop shop bring simplification? Only companies that make long-distance sales… As a result, the OSS will be just a basic simplification for those who ship products to consumers from a single central warehouse in other EU countries.

Who won’t benefit from OSS

But, the one stop shop solution will only benefit Amazon sellers, who do not use fulfillment centers in other EU countries. It will only be easier for companies that ship products to end consumers from a single central warehouse.

B2B deliveries can’t be reported via one stop shop. In this case everything remains as before with local reports in the origin country. Moreover, B2C deliveries within the own country are not reported via OSS, but as usual. 

Especially, the Amazon Commingling transactions (enables the merchant to process a customer order more efficiently) increase the complexity under VAT law and can’t be done via OSS. 

More problems and hurdles with the one stop shop

Many future developments were not considered enough in the regulations. For example, the fulfillment structures of Amazon or the sale products to other companies (B2B) are not (fully) covered by one stop shop. 

As a consequence, companies that use fulfillment or B2B have to deal with different sales tax rates in the specific counties more frequently. 

Conclusion: Biggest tax issues

Yes, we know there are many problems and hurdles coming alongside the tax topic and the one stop shop won’t make it less complicated. The huge concern is that the one stop shop creates other issues like risks because, for example you have to manually submit your declaration. 

As a result, the one stop shop brings more complications than chances for online merchants. Therefore, Amazon sellers should consider to inform at first what advantages and disadvantages there are if they use the one stop shop. Yes, there are some chances, but some risks as well.

If you know about each aspect and ask a tax advisor for help, you can benefit from this system. But remember: the one stop shop is not mandatory.

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