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Amazon Canada – Confusing Fee Structure

I’ve recently tried to decipher the fees Amazon Canada charge on some of my FBA orders and walked away scratching my head.  From my understanding, all FBA orders are charged the following:

  • Referral fee (percentage of the product sale price, usually 15%)
  • Pick and Pack Fee ($1.55)
  • Weight Based Fee (Variable)
  • Tax Handling Fee (usually a few cents – It’s what Amazon charge for collecting sales taxes for you)

Now, here’s where it gets weird.  If a non Prime customer buys something from me, Amazon charge them for shipping.  They also collect sales tax on the shipping amount (based on the tax rate in the Province to which the item is shipping).  Pretty straight forward.  In my payments from Amazon, I see these amounts collected and they then deduct it from my payout as I’m FBA and don’t collect or charge shipping.  But here’s where it gets interesting.

On a few of my orders, I’ve noticed that Amazon are also deducting a Referral Fee on the Shipping amount that they charged to the customer!  I don’t get to keep any of the shipping fees collected as an FBA seller, so why are they charging me a referral fee for this amount?  And then there’s the next complication regarding sales taxes.

Since I’m registered to collect and remit sales taxes in Canada, Amazon charge the customer the appropriate amount of sales tax due for their Province and pass this along to me for my own remittance.  Amazon also add 13% HST (Harmonized Sales Tax) to all of their fees since they’re based in Ontario and this is mandatory.  This isn’t a big deal to me, as it’s a pass through cost that I claim back when I file my own sales tax return.  But here’s where it gets confusing when shipping charges are involved.

Let’s say an item ships to a Province that has a 5% sales tax rate, and said item is sold to a non-prime customer who pays for shipping.  Amazon correctly charge them the 5% tax on the shipping portion.  For instance, if the shipping was $10.00, they’d collect this amount plus the 5% sales tax, totalling $10.50 charged to the customer.  Straight forward enough.  You’d then expect that they’d deduct this $10.50 from my commissions when they do the shipping charge back.  Nope!  They add 13% tax to the shipping amount instead, and ding me for more than they actually collected!  So in this example, they collect $10.50 from the customer, then ding me against my payout for $10.00 + 13% tax equalling $11.30!  This leaves me out of pocket $0.80.  And, as stated above, they’re sometimes charging me a referral fee on the shipping as well.  In this case, the referral fee on the shipping charged would be $1.50 (15%).  So I’m left out of pocket a total of $2.30 on this sale, for reasons I can’t explain!

I’ve an open ticket in with seller support and look forward to getting some answers on this.  It’s left me a little confused, and fairly convinced that this has to be a billing error.  I’ll keep you posted!

UPDATE: April, 9th, 2015

So I received an email back from Amazon and they acknowledge it was a technical error on their behalf.  I now need to go back and check all of my orders for this error and suggest you do the same if you sell on .ca.

Amazon
Apr 09, 2015 09:29 AM
Greetings from Amazon Seller Support

Dear Seller,

Hi this is Louis a specialist from FBA. I have received an update from our engineers and we were able to notice that this was an error caused by the system, therefore we have gone ahead and reimbursed you for the $0.99 you should be able to see it posted on your account withing the next 3 to 5 days and it will be reflected on your next disbursement, if you have any other orders with the same issue please provide them to us to take further action.

Thank you for selling with Amazon,

Louis B.
Amazon.com Seller Support

 

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This Post Has 8 Comments
  1. Can you please elaborate further on what the error was?
    – Was it the 13% Amazon deducts from seller while only charging customer the provincial tax?

    or,

    – Was it the 15% Referral Fee on shipping charges that Amazon deducted from the seller?

    or,

    – both

    1. Hi A,
      I had to go back and re-read this information as it’s been ages since I last looked at it! I believe they were charging both!

  2. Hi Duncan. Can you assist me in finding the complete set of fees that are charged for Amazon.ca. What I am lacking are the details of the referral fees and I am trying to figure if I should try and accommodate for the Province Sales tax within the net profit and ROI calculations that Price Checker 2 will make. Any leads would be very welcome. thank you. Jame

  3. Hi, Duncan,

    I am so happy to find your poster, I had same experience. I have only been a seller on amazon.ca for a month, now I am struggling to set up the tax setting. Could you tell me if I have to have Federal registration number & Provincial Registration Number to set up tax/?
    I just only selected “A-GEN-TAX” on product offer page and checked the box “Use default product tax code” (A-GEN-TAX” at Set Up your Tax Calculation Settings page. , It looks doesn’t work. Thanks.

  4. Hi,

    Thanks for all these infos.

    We are a small Canadian company and we just configured our new Amazon seller account. we took the b asic no-subscription package to begin with. We are almost ready, but I spent hours trying to see where to stup the canadian taxes. I tried to simulate a checkout of our new product (from another amazon account), and I could not see any taxes applied.

    Do we need to set a sale price that also includes the taxes? This would be crazy since every province has a different tax.

    Thanks for the help.

    Benoit
    trucavelo.com

  5. HI Duncan, I am so confused, I just spent 103 minutes with Amazon support trying to figure out how to reconcile the tricking of money coming into my account from sales that have happened over the past 2 months. Can it be harder to account for? NO, I do not think so.

    I have no clue how to properly invoice these sales. Is there anywhere I can get advise or anyone out there who has figured a simple way to invoice an Amazon FBA sale and then pay it off later and clear the Accounts Receivable for those Amazon sales?

    Further, as it seems to all get mangled into one pot for payment to me, how do I properly account for all the fees and ensure I am getting my GST accounted for to be an ITC?

    I finally hung up on them as they kept telling me I had to refer to my Tax Advisor even though I was trying to get information on just how Amazon deals with their accounting to me…. SO VERY FRUSTRATING.

    Cheers, all…. Bruce

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