The Amazon VAT Services Program, which has been very popular among hundreds of thousands of online vendors worldwide, is ending. Surprisingly, only two weeks ago, Amazon announced that its compliance/advisory subscription package, better known as Amazon VAT Services, would cease to exist.
Many online vendors, including individuals, small businesses, and medium-sized taxable persons, have used the Amazon VAT Service program for years to fulfill their tax obligations in numerous countries. The e-commerce giant has transferred a large part of these compliance services to external service providers, with Avalara being the leading external service provider.
Avalara has had numerous third-party service providers to whom it has transferred part of the compliance framework as a necessary step to streamline the compliance process and make it less cumbersome for online vendors.
Timeline
Until October 31, 2024, online vendors that have subscribed to the Amazon VAT Services program can still benefit from these services. Starting November 1, 2024, the entire VAT compliance requirements will be transferred to them or their service provider of choice.
Effect on VAT compliance
This news was publicly shared by Amazon more than two months after Avalara announced that it would withdraw from its contract as the primary service provider for VAT compliance. The dissolution of the Amazon VAT Services program will undoubtedly have a severe impact on the entire community of Amazon users.
Online vendors leveraging this Amazon service to align with VAT requirements for their EU operations will need to search for a new service provider/providers. The marketplace has already shared a list of “preferred providers,” meaning those already part of the scheme as third-party providers. Such providers first leveraged their connection with Avalara.
Amazon will remain responsible for submitting the returns covering the tax period ending September 30, 2024. Practically speaking, for suppliers with quarterly tax reporting mandates, Amazon will submit returns for Q3, and for suppliers with obligations to submit monthly returns, the last return will be for September.
Next Steps
Many online sellers, especially those not EU-incorporated, have digested this news with initial shock. EU and non-EU vendors need to search for VAT service providers that will manage their tax obligations in one or more countries, depending on where they make their supplies.
It should be considered that the chosen service provider needs some time in advance to submit the mandatory documentation to the respective tax authorities, where it will act as a filling provider and/or fiscal representative.
Online vendors need to be very cautious when choosing which service provider to transfer their tax obligations to. Experience teaches us that the punitive penalties could be very high and hurtful to the seller’s reputation. One relevant factor that should determine which provider to choose is the spectrum of services the service provider can offer and execute, as well as the number of countries where its services could be applied.
Online vendors that have been using and relying on the Amazon VAT Services compliance program are now required to find new service providers, as the marketplace announced that it will no longer offer this type of service.
The transfer of these essential operations for the business’s well-being could be very challenging and stressful for online vendors, even more so for those with a place of business outside the EU market. The challenge to find a proper and trustworthy provider is of elementary importance for permitting firms to focus their time and resources on its development and revenue increase.
Aleksandar Delic
1stopVAT Senior Indirect Tax Researcher (Global Content)