This article aims to provide businesses with a comprehensive understanding of tax mapping considerations when setting up an A2X account. Whether you choose to include or exclude transactions from your tax module, this guide will assist you in making an informed decision.
For Amazon and Shopify, A2X separates tax transactions from sales transactions.
This tax separation gives users two options to map the sales and taxes:
exclude sales and taxes transactions from your tax module
Recommended for US and Canadian sellers, and sellers registered in countries with multiple tax rates
Recommended for sellers who are not tax registered or do not use the tax module in the accounting system
include sales and taxes transactions in your tax module
Recommended for sellers registered in countries with one tax rate per country (UK, EU, NZ, AU, etc)
The same mapping rules can be applied to users with zero-rated and mixed rated product groups
Recommended for sellers who are tax registered, and use the tax module in the accounting system
The examples below explain how the tax mapping in A2X affects the information in your accounting system tax modules. We've used a UK VAT registered account for the example but the same mapping principles apply to users outside of the UK.
1. Exclude sales and taxes transactions in your tax module:
If you are not using your accounting system for VAT/GST filing and prefer not to map each transaction in detail, then simply map "No VAT", "BAS Excluded" or your preferred tax rate in the tax rate column as shown in the example below.
Example mapping in A2X excluding VAT (UK Seller)
Example Amazon Invoice in Xero excluding VAT (UK Seller)
2. Include sales and taxes transactions in your tax module
To include sales and tax transactions in your tax module, you'll need to incorporate the taxes separated in A2X back into the applicable income accounts. This ensures that the accounting system recognizes the full gross sales amounts and accurately accounts for the taxes through tax rates.
Mapping taxes to an income account enables businesses to integrate tax rates seamlessly within their accounting system. When taxes are accounted for as part of income, the application of tax rates becomes more straightforward. This simplifies the calculation process and ensures that taxes are accurately reflected in financial statements, tax returns, and other relevant reports.
Mapping taxes to an income account streamlines the tax reporting process. Instead of separately tracking and reconciling tax accounts, businesses can generate comprehensive reports that include both sales and tax data. This simplifies the preparation of tax returns, reduces the likelihood of errors, and saves valuable time during the tax filing process.
Refer to the example below for a visual representation:
Example mapping in A2X including VAT (UK Seller)
Example Amazon Invoice in Xero excluding VAT (UK Seller)
Example VAT Return in Xero (UK Seller)
Tax mapping can be complicated if you don't understand the different tax transactions from your e-commerce store and how to account for them. Some channels only have Marketplace Facilitator Tax transactions available in the data files, and others include tax transactions in addition to Marketplace Facilitator Tax transactions.
While the examples in this article do not cover shipping income or other ecommerce expense scenarios, the mapping principles outlined here can be extended to those cases as well.
This article is intended solely for technical configuration of A2X, there is no guarantee or assurance provided that the detail in this tutorial is best suited to your specific business needs or that it directly suits your tax obligations.
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