Amazon as a Deemed Reseller

What does it mean that Amazon is a marketplace, or more precisely, a marketplace facilitator according to the EU VAT on E-commerce Directive from 2021?

A marketplace facilitator operates an online platform where third-party sellers can list and sell their products to consumers. The marketplace facilitator plays a significant role in the transaction process, often including payment processing, order fulfillment, and customer service.

The EU VAT Directive says that in such a case, Amazon is deemed to be the buyer from you and a reseller of the goods to the customer. Therefore, what appears to be a single purchase are two separate taxable events from the legal standpoint:

First, there is a B2B transaction: we "sell" the goods to Amazon.

Second, there is a B2C transaction: Amazon "sells" the goods to the consumer.

From the point of view of VAT, the sale to a consumer, which would otherwise be a single taxable event, is to be viewed as two transactions:

We handed the goods from the warehouse to Amazon without any transport and Amazon then delivered the goods to the consumer as a distance sale.

The rules for deemed suppliers (resellers) have one important effect: Amazon is responsible for collecting and remitting VAT on sales made by US-based businesses through its platform to consumers in the EU. The Europeans introduced this rule to better enforce tax collection (VAT due was frequently not paid by non-resident sellers). U.S. sellers still have to register for VAT and periodically file, of course. This rule just means your cashflow is different. European businesses still collect all the money, including tax, as has always been the case.

So, let’s suppose that we are a US seller selling goods on the Amazon marketplace to Czech customers from a Czech warehouse.

If it's a B2B sale to a business customer, we have to account for the tax according to the domestic rules for businesses. We collect all the money along with the sale and remit it to the government periodically upon filing a return.

For B2C sales, we are deemed to have sold the goods to Amazon in the warehouse and Amazon is deemed to have sold the goods to the consumer. Per EU law, this virtual B2B sale to Amazon is exempt from VAT with a deduction since the VAT is secured in the second B2C transaction. So we still declare this sale on our Czech VAT return as VAT free, but Amazon will collect and pay the tax on our behalf.

Please note that you may be asked to fill in the sales due to the deemed reseller regime on your VAT return - to distinguish it from other B2B sales.

Explore more insightful links related to this topic to help you better understand European VAT:

Intra-community Transfer of Goods

How VAT Works When You Sell in Europe from U.S.

Amazon VAT knowledge center

EC Explanatory Notes on VAT e-commerce rules

European Commission web page for VAT

VAT directive

Implementing regulation