Starting a business selling on Amazon comes with many advantages, but you also have to follow rules to be in compliance with the IRS: let's see what fees you have to pay on Amazon FBA.
In this brief guide we will see to explain the definitions and rules we need to follow to pay taxes.
Some definitions: what is ecommerce
First of all, let's try to understand what it is: ecommerce is basically the business activity that is carried out using the electronic channel of the Internet
When it comes to commercial activity, there is a clear definition: the marketing of goods and services, the distribution of digital products, and financial and stock market transactions conducted through the Internet qualify as commercial activity.
One thing I want to focus on are the concepts of online sales, affiliate market, google adsense, pay per click, infoproduct sales, and video course sales.
These types of activities are to be considered business activities for all intents and purposes, and therefore being business activities, they are subject to the regulations that we are going to examine in this guide.
When we talk about ecommerce, that is, commerce through the Internet channel, there are two main forms: indirect and direct ecommerce.
Indirect ecommerce
The first is indirect ecommerce, which occurs, for example, in the case of Amazon fba or of ebay, etsy etc...
In these cases, the commerce has physical physical goods as its object, so there is an online platform where the customer takes information about the product's characteristics, delivery method, price, and will always order from this online platform and then see the product physically delivered to their address.
So we have the contract finalization online, while the delivery will be done physically.
Direct Ecommerce
Direct ecommerce, on the other hand, deals with intangible goods, so the entire business transaction from contract conclusion to distribution of the digital product is telematic and takes place through the Internet.
The case of dropshipping
A special case is that of the dropshipping.
Dropshipping is the ability to sell your products online without having a physical warehouse.
Not having a physical warehouse in itself has advantages, both in legal terms (think of all the various communications about the warehouse, uses, etc.) and also from a fiscal point of view, as there is essentially no problem of unsold goods.
So in this case the online seller will come closer to the legal qualification of the business procurer, but of course each case must be seen individually.
Obligations and obligations
Let's try to understand what requirements need to be put in place to start a commerce business and what are the legal obligations to which to adhere in order to be in compliance and not incur penalties in conducting online business.
First of all, let us clarify that in the case of both direct and indirect ecommerce, you need chamber of commerce registration and the opening of the VAT number.
Let's definitely dispel the myth of the 5,000 euros.
It is not true that it is not compulsory to open VAT numbers if we do not exceed 5,000 euros: it is not compulsory to open VAT numbers up to 5,000 euros only in the case of occasional benefits.
The moment I have products for sale online, they are for sale 24/7. So it is a professional activity, a non-occasional business activity.
So even if I sell only one euro of products, but I have my whole catalog online, we are in the presence of a stable activity and therefore registration in the chamber of commerce and the opening of a VAT number is required.
Following chamber of commerce registration and the opening of the VAT number, it will be necessary to choose the ateco code identifying the professional activity and the presentation of the SCIA.
We also point out that although there are codes that qualify and quantify many products, so without prevalence of any, it will be necessary, however, to indicate them, because in the SCIA it will be necessary precisely to indicate those that are the subject of my activity in precisely descriptive terms (thus indicating whether household goods, clothing ...).
Tax and social security costs
Let's see what tax and social security costs you will face with a e-commerce on Amazon FBA.
In Italy right now we have a tax regime that is very convenient, the flat-rate scheme.
The flat-rate scheme and the flat-rate scheme for new activities which still has a subcategory, with even more benefits, lends itself great for starting with Amazon FBA or online sales, new professions such as youtubers, social media managers etc...
Of course, along with the advantages there are also some limits well-defined and of the entry requirements.
As for the flat rate, there is a guide that clarifies all the overall aspects with costs, indirect (vat) and direct (income tax) taxes.
In addition to taxes, an important cost in the day-to-day management of VAT registration is also covered by the social security contributions and then by the payment of inps, which is measured in fixed contributions and variable contributions.
There are exemptions for employees there are other types of exemptions, so unlike the traders' and artisans' management there are many aspects that need to be addressed individually depending on the specific case.
To recapitulate, from a tax perspective, where one does not opt for the flat-rate scheme, and then only in the ordinary regime, we will have to be careful about vat regulations, income tax and social security contributions.
The regulation of VAT
VAT discipline in the ordinary regime (in the flat-rate regime it does not apply) consists of three elements and three basic features:
- the country of the supplier
- the customer's country
- the type of customer
What is the type of customer? is it an end consumer or is it in turn a btob (business to business), so in turn it is a vat holder.
Once we have identified these three elements, we could distinguish between:
- internal transactions, i.e., transactions made in italy between Italian supplier customer and consumer customer, i.e., professional customer;
- intra-Community transactions, those occurring within the European Economic Area;
- non-EU transactions especially item 2.3 the qualification of the client is essential
So depending on the type of customer and the type of transaction, there will be different vat regulations.
A novelty from the tax point of view is the vat tax system, which is optional, i.e. you are not subject to it at least unless you voluntarily choose it. It is an option for those engaged in electronic commerce, so suitable for our case of Amazon sellers: the minimum step shop moss regime moves vat regime exclusively for those engaged in electronic commerce that simplifies things a bit because basically make vat be paid in the country of residence both in the presence of btob whether in the presence of btoc (business to consumer).
To join the moss scheme, there is a portal to which we must register our company.
Income taxes and INPS
Once we have looked at the VAT regulations, we should go on to understand how income taxes and contributions work to determine what are the costs of running and maintaining the online business.
However, as far as income taxes and INPS are concerned, these have many variables and many differentiating elements, sometimes including exemptions, and so in order to go and determine what the costs of direct taxes and INPS are, it is necessary to basically concretize your position, so with all the related elements, such as the presence of other income, whether there are other employments, whether you have chosen sole proprietorship rather than corporation, in order to go and determine precisely the costs precisely that result.
