Etsy Sales VAT Tax mapping settings can vary greatly by a wide range of different variables so the purpose of this article is to outline different scenarios as they apply in A2X.
The first point to establish is do you need to be aware of VAT and if so are you responsible for collecting and remitting tax or does Etsy do this on your behalf?
VAT Registered
For Etsy sellers in the UK who are VAT registered, it seems that Etsy prices are tax inclusive and Etsy does not collect and remit on your behalf.
This means if you import into Xero/QuickBooks Online/Sage you need to calculate the VAT and declare it on your VAT return as normal.
The only difference to this for physical items is if the item is less than £135.00, the goods are being dispatched from outside the UK and the buyer is in the UK, if these criteria are met then Etsy does collect the VAT on your behalf.
If you are required to calculate, collect and report VAT then ensure you are familiar with the applicable rates for your business set up to be mapped within the Accounts and Taxes tab.
Non VAT Registered
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 and Sage).
Once you know your VAT responsibility there are 3 techniques that are useful for Etsy sellers in A2X for handling VAT.
Grouping by Country - this allows sellers to apply tax rates to corresponding countries. For example a UK seller may apply a 20% rate for sales to the UK, and a different tax rate for sales to other EU countries or to countries outside the EU.
Grouping by Product Type - this allows sellers to group sales of products that have different tax rates together. For example a UK based seller may have VAT on some items they sell, and no VAT on other items.
Specific VAT rates for multiple VAT registrations - users can request access to the advanced VAT settings - if you need specific VAT rates for multiple VAT registrations, please contact A2X support to enable this option.
1. Using Group by country in A2X for Etsy
To enable this option use the group sales by country setting - Settings > Invoices
When enabled, this setting will split the sales and other transaction in your Etsy deposits by the country the sale was shipped to. So you will see transactions like this in your deposits and they can be mapped to the appropriate accounts and tax rates.
2. Using Product Types in A2X for Etsy
Please note: Product Types will only work if you use SKUS in Etsy. If you wish to use A2X Product Types you will need add SKUs to your Etsy listings?
If you have specific products or sets of products that require special tax treatment, for example reduced rate or zero-rated products then you can use product types to group those product sales together for special VAT handling. You can read more about product types and how to configure them.
Here’s an example of using product types to track zero-rated products. First you would define the product type, in this case we're using SKU patterns, but you can also list the SKUs one-by-one for each product type group:
The transactions for those products would be grouped together and can have special tax rates applied.
3. Specific VAT rates for multiple VAT registrations
For more advanced VAT requirements A2X has an optional VAT setting (please request this feature to be enabled if you have advanced VAT requirements). This option is suitable for sellers who may have multiple VAT registration across the EU and need to track sales with different VAT rates.
Select the countries where you are VAT or Tax registered. This setting will then allow you to group transactions based on your registrations either to a registered country, anther EU country or exported from the EU
[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.]
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