Tax Risks due to Commingling and Goods Movements at Amazon FBA

Optimizing Data Processing for Amazon Marketplace Businesses: Tax Exemption on Intra-community Deliveries

Movements of Goods in the Amazon FBA Network and Tax Challenges

E-commerce companies that use Amazon FBA or similar fulfillment services store their goods in various EU states. In this process, products are transported from one warehouse to another in a different member state. These movements of goods must be correctly documented and reported for tax purposes. The tax exemption for intra-community supplies only applies if evidence is fully available.

A central issue is that although Amazon provides reports on the movement of goods between warehouses, these cannot be used directly for tax purposes. Companies must process the data to accurately disclose it in the respective countries for Intra-Community Supplies Report and VAT Returns. Missing or incorrect reports can lead to the revocation of tax exemption.

In addition, commingling on Amazon, which is the mixing of identical products from various companies, complicates the clear allocation of an intracommunity supply. When Amazon merges inventories, a product stored in a certain country may be sent out in response to an order from a different country. As a result, the originally tax-free reported intracommunity supply can no longer be clearly proven.

VAT-free Intra-Community Supply: Requirements and Pitfalls

For a supply between two EU countries to be exempt from VAT, certain conditions must be met:

  
• The product is physically transported to another EU country.
  
• The recipient has a valid VAT identification number.
  
• The supply must be properly documented to prove its tax-free nature.

From a tax perspective, there is a close correlation:

  
• The intra-community transfer of goods is treated as an intra-community supply in the country of departure.
  
• In the country of destination, it is considered an intra-community acquisition and must be reported there.

Commingling and Tax Challenges with Intra-Community Supplies

Amazon offers the option of combining identical goods from different companies to ensure the fastest possible supply to end customers. This practice is referred to as Commingling.
However, Commingling can lead to tax problems, especially if the buyers are located in a different EU country. Two scenarios must be distinguished:

1. Commingling in Business-to-Business Sales (B2B)

A company sells a product to another company with a valid VAT identification number in another EU country. The product was originally stored in Germany at Amazon FBA. However, by using Commingling, Amazon removes the same product from a warehouse in France and delivers it directly to the buyer.

This means for tax purposes:

• The company has reported an intra-community supply from Germany to France, but the physical delivery took place from France.
• The originally reported intra-community supply does not match the actual movement of goods.
• The tax authority can deny the tax exemption because the evidence does not match the reported supply.

2. Commingling in Sales to Private Consumers (B2C)

A company sells a product to a private individual in France. The product was stored in Germany in an Amazon FBA, but due to commingling, Amazon takes it from a warehouse in Spain and delivers it to the end customer.

In terms of tax, this means:

• The sale falls under the concept of Intra-community distance sale of goods.
• The Value Added Tax (VAT) must be remitted in the country of destination (France).
• If the company is not registered in France, the supply must be processed via the OSS procedure (One-Stop-Shop).

Solution for VAT Compliance with DutyPay

To avoid tax risks, many companies rely on automated compliance services from DutyPay. These help to efficiently fulfill tax obligations:

Integration of Amazon for Automatic Capture of Relevant Business Action Data

Amazon reports are automatically loaded into the HubSystem. Important business actions, such as intra-community transfers, are identified and processed in such a way that they can be directly transmitted to the responsible authorities.

Creation of Pro-Forma Invoices and Reports on Movements of Goods

Each intra-community transfer as well as other cross-border goods movements are automatically recorded and documented. Pro-forma invoices and good movement reports are generated for relevant business actions. These are available in the InvoiceHub as both PDF files and as data tables (Excel tables).

Digital solutions and compliance services from DutyPay help e-commerce companies and their tax consultants ensure VAT compliance and minimize financial risks.