When it comes to mapping for Sales VAT in A2X there a few things to consider first, these are outlined in more detail below. Sales VAT Tax mapping settings can vary greatly by a wide range of different variables so this article will only outline different scenarios as they apply in A2X.
We cannot advise which is the best tax solution for your business needs but by providing as much information as possible on the different options available in A2X you and your accountant will be able to decide which is the best tax setup for your business needs.
Important things to consider when completing the tax mapping for sales within A2X:
- Are you required to calculate VAT on sales and if so, at what rate?
- Do you have multiple rates applicable (eg. 20% and Zero Rated)?
- Are you using the Amazon VAT Calculation Service?
- Orders shipped to Non VAT countries?
- Will you be completing returns and running vat reports from your accounting system?
How the settings and mapping requirements change under different scenarios.
1. Are you required to calculate VAT on sales and if so, at what rate?
If you are not required to calculate, collect and report VAT then you may be able to leave your tax mapping blank (QuickBooks Online) or you could map Tax Exempt or No VAT (Xero).
If you are required to calculate, collect and report VAT then ensure you are familiar with the applicable rates for your business step up to be mapped within the Accounts and Taxes Tab.
2. Do you have multiple rates applicable (eg. 20% and Zero Rated)?
If you have a single rate only to consider, you can move forward to question 3.
Where multiple rates apply, what determines each rate?
Is it that you have some Zero-Rated products and some Standard Rate products? If so, product type grouping can help you split the different rated products out into groups so that applicable accounts and tax rates can be applied in the accounts and taxes page of A2X. To learn more about product type grouping in A2X, click HERE
If you are registered for VAT in multiple countries and the product you sell attracts different rates depending on where they are sold, you may decide to group by product type and group by country. Pan EU VAT is very complex and we do recommend speaking to a VAT expert if you are registered in numerous EU countries.
3. Are you using the Amazon VAT Calculation service?
If you have enabled Amazon VAT calculation service you will see additional lines to map within the 'Accounts and Taxes' section. Like all sections you can click the orange cross, to expand the section to map the individual tax lines.
If this feature is enabled please note that the TAX lines are 100% VAT and the associated sales, shipping and gift wrap lines are net amounts excluding VAT. These must be coded appropriately to your accounting system depending on whether you are lodging VAT returns internally or externally from your accounting system. You may notice, in the above example, there is a rate assigned to the TAX lines. This is the process if the VAT returns are completed in the accounting system. For more detail see point 5.
Within this section there are two considerations:
a) Are you lodging your return from within your accounting system?
Specific treatment is outlined in Section 5.
b) Are you calculating and lodging VAT external from your accounting system?
If Amazon VAT Calculation service is enabled and the VAT is lodged externally from your accounting system the solution is fairly simplistic. A2X will pick up the TAX lines separately and can be coded to the 'Amazon Sales Tax Collected' Liability account with a No Tax or Tax Exempt rate applied. When you run a balance sheet report the amount sitting in this liability account is the amount that should be remitted to your TAX authority.
4. Orders shipped to Non VAT countries?
A2X has a feature that can be enabled on your account to separate out the sales that don't attract VAT. These could be sales to other businesses or sales to Non VAT countries such as Jersey or Guernsey.
Within Settings > Invoices > Group no Tax Transactions
Please contact a member of support to enable this feature if you do not see the option within your account.
A2X will separate the NO TAX lines, for the sales, gift wrap and shipping transactions lines, to which a 'Zero Rated' tax rate could then be assigned.
Here is an example of mapping on an account which is spilt by country shipped to and 'Group no tax Transactions'
5. Will you be completing returns and running vat reports from your accounting system?
When VAT returns are being completed from within your accounting system the information entered must be accurate to enable an accurate VAT liability to be calculated. The correct VAT rates must be attributed to each line item so that the system can calculate the appropriate amount.
If you assign an amount to a VAT liability account the account system will not recognise that the amount is 100% VAT so a small workaround is required.
In order for the system to calculate the VAT liability the gross amount must be coded to the main account with the correct VAT rate so that the system can strip out the correct VAT Liability.
If Amazon VAT Calculation is not enabled the mapping is simpler. The transaction line is coded to the account with the appropriate VAT rate. In the example below, the Group Sales by Country is enabled, identified by the two letter country code, along with Group by Product Type, identified by the 'Hard Hat' text.
When Amazon VAT Calc is not enabled the GB sales include the VAT so the mapping below assigns 100% against the 'Sales - Amazon' account and the accounting system will strip out 20% VAT.
If you see 'All other Products' it indicates that you have not assigned all the SKU's to a product type. When using the Group by Product Type feature in A2X, we recommend you ensure all SKU's are assigned to a product type.
When the Amazon VAT Calculation Service is enabled you will need to assign both the net sales and the associated VAT line to the same account code and assign the same VAT rate to both.
The Net Shipping mapping
The Net Sales mapping
The VAT mapping
When this is sent to your accounting system the Net amount plus the VAT amount hits the account and the accounting system can strip out the correct VAT amount. In the example above the VAT rate of 20% will be stripped out which should match the VAT Amazon has calculated.
If there are differences it may be a case that non VAT transactions are being picked up and it may be worth enabling the Group no VAT transactions option.
The more complex your business model, potentially the more complex the mapping required within A2X. Although we can not assist with the TAX rates we are more than happy to application of your VAT mapping.
We have a directory of A2X Accounting and Bookkeeping expert partners that can be found HERE who specialise in both Amazon Accounting and A2X.
[Disclaimer:The team at A2X are happy to provide users with technical assistance in applying tax rules to their A2X setup. We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.]