Amazon – Deemed Supplier Liability and Blocked Merchants’ Accounts

Amazon, a global e-commerce tech giant, has pulled a dragnet investigation into its European marketplaces. The US stronghold in the last period has decided to convey a thorough VAT compliance audit of accounts of its European registered users. 

Amazon and similar worldwide operative e-commerce platforms conduct this type of detailed audit regularly as a necessary operation to decrease inaccurate information in its marketplace. 

Legislative Framework

The EU e-commerce package of regulations, which came into force on July 1, 2021, has noticeably reshaped the legislative framework for all tax responsible e-commerce participants. 

The regulations have introduced important and extensive responsibilities for the Digital Platform operators and underlying suppliers. 

The Deemed Supplier legal term was attached to the operative model of the digital platform and introduced a new level of responsibility for the operations handled through the platform. 

The Digital Marketplace should be treated as a deemed supplier if it facilitates the following: 

• Distance sales of goods imported to the EU with a value not exceeding EUR 150 and/or
• Supplies of goods to customers in the EU, irrespective of their value, when the underlying supplier is not established in the EU (domestic supplies and distance sales within the EU are covered).

These provisions and the connected case law put an essential burden of responsibility on the Platform operations. The Platform operator is responsible for charging, collecting, and remitting taxes if the underlying supplier isn’t doing it per the law. Plus, the interest and penalties can occur in numerous cases. 

The responsibility, of course, doesn’t finish within the scope of those provisions. It goes much further; e.g., the Platform Operator needs to store all relevant information related to the underlying supplier for ten years. 

Companies such as Amazon need to convey detailed research on the validity of VAT-related information of each seller operating through their platform as one of the ways to combat fraud, non-payment of taxes, and the reality of supplier-submitted details (VAT number, country of origin, etc.). 

EU Amazon Marketplace

Amazon has conducted a sort of dragnet investigation into its European Marketplaces to verify the validity of the TINs submitted by registered users and all related tax compliance data, to be able to react-block non-compliant users and to limit the scope of potential penalties as well as payment of owed tax to various EU tax authorities. 

This VAT compliance tool has resulted in the blocking of thousands of EU-based customer accounts. In large portions of these cases, this is expected due to the non-compliant manner of operativity of the user in question. Still, unfortunately, the extent of the number of users is just collateral damage. Why collateral damage, because their operativity is entirely legal, and they have been compliant since day one. 

Some users have been operating through Amazon marketplaces for over ten years, making six monthly figures, and are blocked, even if fully compliant. 

This kind of problem shouldn’t happen when the business does everything by the books and even more if it’s using your services for a long time, making a severe profit for both parties. 

Present situation and potential remedies 

The Amazon operational team is working diligently in resolving the current problem, which has resulted in the temporary closure of thousands of accounts of its customers. One should bear in mind that a significant percentage of users aren’t operating in full compliance with the applicable provisions.

On the other hand, many customers conduct their operations following the law. Due to technological discrepancies, their accounts are also labeled suspicious and necessarily blocked. The company’s customer support and other operative departments are trying to resolve the problem as soon as possible, but this could take time.