Hello,
I'm recently needing to become VAT registered on Amazon FBA, I'm happy that our business is growing but this is a milestone we all potentially go through and I'm naturally nervous about it
I'd like to check my thinking/calculations with some of the more experienced members - I hope this okay, I intend to keep my prices the same to remain competitive
I believe I can just use net figures to simplify the calculation now that I'll be VAT registered, with the important bit being that I am starting with the Net Sales Price, as the VAT on the sales price is passed on to the government
So, assuming that I am now VAT registered in the UK, my new profit calculation would be (assuming I'm not advertising, not including storage or sending to amazon etc):
- Profit = Net Sales price - Net Referral Fee - Net Fulfilment Fee - Net Cost of Good
Translated to include consideration of VAT
- Profit = (Gross sales price (incl VAT) - Sales VAT) - Gross Referral Fee (incl VAT) - Gross Fulfilment Fee (incl VAT) - Gross Cost of Good (incl VAT) + Referral VAT + Fulfilment VAT + Cost of Good VAT
These equations are basically the same and give the same answer, note that I am reclaiming the input vat from the Referral, Fulfilment and Cost of Good
An example
- Gross Sale Price = 2.99
- Sale Price VAT = 0.5
- Net Sale Price = 2.5
- Net Cost of Good = 0.38
- Net Referral Fee = 0.46
- Net Fulfilment Fee = 1.52
Profit = 2.5 - 0.38 - 0.46 - 1.52 = 0.14
Could you please review and tell me if this is correct? is using net figures the sensible technique to use?
Additionally, as a new VAT registered seller, what would you recommend to do for a pain free transition and VAT registration experience :)
Many thanks for your help!
