By
August 11, 2026
How Does VAT Work When Selling Through Online Marketplaces?
Selling products through online marketplaces can make VAT more complicated because the seller is not always the party responsible for collecting and paying VAT to HMRC.
UK companies selling through platforms such as Amazon, eBay, Etsy and other online marketplaces need to understand:
The most important point is:
A marketplace collecting VAT does not automatically remove all VAT responsibilities from the seller.
The correct VAT treatment depends on the transaction.
An online marketplace is broadly an online platform that facilitates transactions between sellers and customers.
Examples can include platforms such as:
Amazon
eBay
Etsy
and other marketplace websites or apps.
However, not every website that advertises products is necessarily an online marketplace for VAT purposes.
HMRC looks at factors such as whether the platform:
A website that merely advertises products or redirects customers elsewhere may not necessarily qualify as an online marketplace under these rules.
There is no single answer.
Depending on the transaction, VAT might be accounted for by:
The seller
or
The online marketplace
The answer can depend on:
Where is the seller established?
Where are the goods located?
What is the value of the consignment?
Is the customer VAT registered?
Are the goods being imported?
These questions should be answered before determining who accounts for VAT.
For a UK-established company selling goods already located in the UK, the normal VAT rules generally apply.
For example:
UK company
↓
Stock stored in England
↓
Product sold through marketplace
↓
UK customer
If the company is VAT registered and the product is taxable, the company will generally be responsible for accounting for VAT on the sale.
The marketplace may calculate or collect the money as part of its payment process, but this does not necessarily mean the marketplace is legally responsible for the VAT.
Suppose your VAT-registered UK company sells a standard-rated product through an online marketplace.
For illustration:
Product before VAT: £100
VAT: £20
Customer price: £120
The marketplace may collect the £120 from the customer.
It might then deduct:
Marketplace commission
Advertising fees
Fulfilment charges
and other fees before transferring the remaining amount to your company.
However, you should not simply record the net payout as your sales revenue.
This is one of the most important accounting issues for marketplace sellers.
Suppose:
Customer pays: £120
The marketplace then deducts:
Marketplace fees: £20
and transfers:
£100 to your bank account
Your sales revenue is not necessarily £100.
The transaction needs to be separated into:
Gross customer sale
minus
VAT
minus
Marketplace fees
equals
Net marketplace payout
Your accounting records should therefore reconcile the marketplace's sales reports with the money actually deposited into your bank account.
Relevant taxable marketplace sales generally form part of a UK company's VAT-taxable turnover.
You should therefore consider relevant sales across the whole business.
For example:
Amazon sales
eBay sales
Etsy sales
Shopify sales
Direct website sales
Other taxable sales
Your VAT-registration position should not normally be assessed separately for each platform.
UK-established businesses generally need to register for VAT when their VAT-taxable turnover exceeds the applicable registration threshold or they expect it to do so under the relevant rules.
Because thresholds can change, businesses should check the current figure directly with HMRC rather than relying on an old blog article.
Voluntary VAT registration may also be possible below the compulsory threshold.
Sometimes.
Online marketplaces can be responsible for collecting and accounting for VAT on particular transactions.
This commonly becomes relevant where:
But this does not mean Amazon or another marketplace accounts for VAT on every transaction.
A UK-established VAT-registered company selling its own UK-held stock will generally remain responsible for VAT on its ordinary taxable UK sales.
Again, it depends on the transaction.
The marketplace may be responsible for VAT under particular marketplace rules, especially where overseas sellers or imported goods are involved.
For ordinary sales by a UK-established business from stock already located in the UK, the seller's normal UK VAT obligations generally remain relevant.
The same broad principle applies across qualifying online marketplaces.
Potentially, depending on the nature of the sale.
Businesses should not assume:
Marketplace collected tax
means
Seller can ignore VAT
Instead, determine:
What tax was collected?
Who was legally responsible for it?
Was it UK VAT?
Was it foreign VAT?
Was it import VAT?
How should the transaction appear in the company's accounts?
This becomes particularly important for businesses selling internationally.
Special rules can make the online marketplace responsible for VAT on certain sales.
One important situation involves goods located outside the UK when sold and sent to UK consumers in qualifying consignments.
Another involves goods located in the UK that are sold through a marketplace by an overseas seller.
These rules were introduced to make marketplaces responsible for collecting VAT in certain circumstances where the underlying seller is overseas.
Special VAT rules apply to certain consignments of goods located outside the UK when sold to customers in Great Britain through an online marketplace.
Where the total consignment has an intrinsic value of £135 or less, the marketplace will generally be responsible for charging and accounting for UK VAT at the point of sale, subject to exceptions.
The £135 threshold applies to the total consignment, rather than simply looking at the price of each individual product.
Imagine goods are located in China.
A customer in England buys them through an online marketplace.
Goods located in China
↓
UK consumer orders through marketplace
↓
Consignment value £80
↓
Goods shipped to Great Britain
In a qualifying transaction, the online marketplace generally charges UK VAT at the point of sale.
This means the customer sees VAT as part of the marketplace checkout process.
Different rules apply.
Where the total consignment value exceeds £135, the normal import VAT and customs rules generally apply.
For example:
Goods outside UK
↓
Customer purchases goods
↓
Consignment exceeds £135
↓
Goods imported into UK
↓
Normal import VAT/customs treatment
Who ultimately pays the import charges can depend on the shipping and contractual arrangements.
This distinction is important.
Suppose a customer buys:
Item A: £80
and
Item B: £70
If both products are shipped together as one consignment:
Total consignment = £150
You should not simply treat each product separately because both individual items are below £135.
The relevant value can be the total value of the consignment.
The rules are different.
Suppose an overseas business stores goods in a UK warehouse and sells them through an online marketplace.
For qualifying sales to UK consumers:
Overseas seller
↓
Goods already in UK
↓
Sale through marketplace
↓
UK consumer
the marketplace can be responsible for accounting for UK VAT.
The value of the goods does not need to be £135 or less for this particular marketplace rule to apply.
Marketplace VAT rules can sometimes treat the transaction as though there are two supplies.
Conceptually:
Seller
↓
Marketplace
↓
Customer
This is known as a deemed supply arrangement.
The marketplace can therefore become responsible for VAT on the sale to the final customer even though the underlying goods belong to the seller.
This is particularly relevant to overseas sellers using UK marketplaces.
Not in the same way.
If your company is genuinely established in the UK and sells goods located in the UK, it will generally remain responsible for VAT on its taxable sales.
This distinction is crucial:
UK-established seller + UK stock
is different from:
Overseas seller + UK stock
Online marketplaces may request evidence showing where your business is genuinely established.
This can become more complicated.
Having a company registered at Companies House does not necessarily settle where the business is established for VAT purposes.
HMRC and online marketplaces may consider where the business actually has the human and technical resources needed to make or receive supplies.
Therefore, a director living overseas should not automatically assume:
UK limited company = UK-established seller for every VAT rule
If establishment affects the marketplace's VAT treatment, obtain professional advice based on the actual business structure.
Potentially.
Marketplace collection does not automatically mean the seller never needs VAT registration.
For example, registration may still be relevant where the company:
Your entire business model needs to be considered.
Potentially, yes.
Suppose your VAT-registered company imports stock into the UK before selling it through a marketplace.
The company may incur import VAT.
Where the normal VAT recovery conditions are satisfied, qualifying import VAT may potentially be reclaimed.
The fact that the products will later be sold through Amazon, eBay or another marketplace does not by itself prevent VAT recovery.
VAT-registered marketplace sellers importing goods may potentially use Postponed VAT Accounting (PVA).
Instead of:
Import goods
↓
Pay import VAT upfront
↓
Reclaim it later
PVA can allow the business to:
Import goods
↓
Account for import VAT on VAT Return
↓
Recover eligible VAT through the same VAT Return
This can improve cash flow for businesses importing substantial amounts of inventory.
Potentially.
Marketplaces may charge sellers for:
The VAT treatment depends on the supplier, service and invoicing arrangements.
If qualifying UK VAT has been properly charged to your VAT-registered business, it may potentially be recoverable subject to normal rules.
This can create a different VAT issue.
If an overseas marketplace supplies services to your UK VAT-registered company, the reverse charge may potentially apply to those services.
For example:
Overseas marketplace
↓
Provides advertising or platform services
↓
UK VAT-registered company
The company may need to account for UK VAT using the reverse-charge rules.
Check the marketplace invoices rather than assuming every fee contains ordinary UK VAT.
Not simply because it is deducted before the payout.
Suppose:
Customer pays £120
Marketplace takes:
£15 commission
Seller receives:
£105
You should not automatically calculate your VAT based only on the £105 bank deposit.
The customer sale and marketplace fee are separate accounting transactions.
The correct VAT treatment should be applied to each.
Amazon FBA introduces another important question:
Where is the stock physically located?
If your inventory is stored in the UK and sold to UK customers, UK VAT rules apply.
But if inventory is stored in Germany, France, Italy or another country, local VAT obligations can potentially arise.
Moving inventory between fulfilment centres can also create VAT reporting requirements.
Businesses using international fulfilment networks should monitor stock locations carefully.
Potentially, yes.
Suppose:
UK company
↓
Stores inventory in Germany
↓
Sells products from German warehouse
The company may have German VAT obligations even though it is incorporated in the UK.
A UK VAT registration does not automatically cover all European marketplace sales.
A UK company selling through Amazon's European marketplaces needs to consider:
The correct VAT structure depends heavily on the fulfilment model.
Suppose a UK company stores stock in England and sells through a marketplace to a customer in the United States.
UK stock
↓
Marketplace sale
↓
Goods physically exported to USA
A qualifying export may potentially be zero-rated for UK VAT, provided the applicable conditions are satisfied and the company obtains appropriate evidence of export.
The marketplace sale does not remove the requirement to retain export evidence.
Goods exported from Great Britain to EU customers may also potentially qualify for zero-rating for UK VAT where the relevant export conditions are satisfied.
However:
0% UK VAT
does not mean:
No tax anywhere
EU import VAT or local VAT may become payable when the goods enter the EU.
The seller should understand who is acting as importer.
Dropshipping requires particular attention because the UK company may never physically possess the products.
For example:
UK company lists product on marketplace
↓
US customer orders
↓
Chinese supplier ships directly to USA
The goods move:
China → USA
They never enter or leave the UK.
You should therefore not automatically treat this as a UK export merely because the marketplace seller is a UK company.
VAT and other tax treatment should reflect the actual supply chain.
These two concepts should not be confused.
VAT collected on the customer sale, potentially by either the seller or marketplace.
VAT arising when goods are imported into a country.
A single ecommerce transaction can potentially involve both concepts.
Always identify:
Sale
and
Movement of goods
separately.
Another common mistake is confusing VAT deducted from customer sales with fees charged by the marketplace.
Your marketplace statement might contain:
Gross sales
VAT
Refunds
Commission
Advertising
Fulfilment fees
Storage
Other charges
Net payout
Each item may require separate accounting treatment.
A strong bookkeeping process should reconcile:
Marketplace orders
↓
Gross sales
↓
VAT
↓
Refunds
↓
Marketplace fees
↓
Other deductions
↓
Net payout
↓
Bank deposit
Do not simply record:
Bank deposit = sales
That approach can materially understate revenue and create incorrect VAT records.
Suppose your marketplace report shows:
Gross customer sales: £12,000
Refunds: £500
Marketplace fees: £1,500
Other charges: £300
Net payout: £9,700
The £9,700 deposited into your bank is not necessarily your sales figure.
Your accounting system should record the underlying transactions separately.
This is especially important when VAT is included in customer payments.
Marketplace refunds should be recorded correctly.
If a taxable sale is cancelled or refunded, the associated VAT may also need adjustment.
Do not simply delete the original transaction.
Your records should create an audit trail:
Original sale
↓
VAT recorded
↓
Refund/credit
↓
VAT adjusted
This makes reconciliation much easier.
Digital platforms can also have reporting obligations that are separate from VAT.
Platforms may collect seller information and report certain seller and transaction information to HMRC.
This does not mean that the marketplace report replaces your tax return, VAT Return or accounting records.
Your company remains responsible for maintaining accurate business records.
No.
Marketplace reporting and VAT registration are separate issues.
A platform reporting information to HMRC does not automatically mean the seller owes VAT.
VAT obligations depend on factors such as:
If your company is VAT registered, you should ensure the marketplace has the correct VAT registration information where required.
The details should correspond with the business information registered with HMRC.
Incorrect information can cause:
No, not simply because you use multiple marketplaces in the UK.
VAT registration relates to the business rather than creating a separate UK VAT registration for each sales platform.
For example:
ABC Online Ltd
might sell through:
Amazon
eBay
Etsy
Own website
but use the same UK VAT registration for its UK business activities.
Foreign VAT registrations are a separate issue.
Shopify is typically your own online storefront rather than an online marketplace operating under the marketplace VAT rules discussed above.
This distinction matters.
Your business might have:
Amazon → marketplace sales
and
Shopify → direct sales
The VAT treatment should be determined separately for each type of transaction.
When calculating relevant taxable turnover, however, you generally need to consider the company's overall taxable sales.
Marketplace sellers should avoid:
Before selling through an online marketplace, ask:
Where is my company established?
↓
Where are the goods located before the sale?
↓
Where is the customer?
↓
Is the customer a business or consumer?
↓
What is the consignment value?
↓
Who is responsible for VAT — seller or marketplace?
↓
Are goods being imported or exported?
↓
Is import VAT recoverable?
↓
Are marketplace fees subject to VAT or reverse charge?
↓
Do I hold stock overseas?
↓
Do I need foreign VAT registration?
↓
Can I reconcile gross sales to net payouts?
This process should be repeated whenever the business expands into a new marketplace or fulfilment country.
VAT can be accounted for either by the seller or, for certain transactions, by the online marketplace. The treatment depends on factors such as where the seller is established, where the goods are located and whether the goods are being imported.
Sometimes Amazon may be responsible for collecting and accounting for VAT under online-marketplace rules, but this does not apply to every transaction.
It can in qualifying marketplace transactions. UK-established businesses selling UK stock generally remain responsible for their ordinary VAT obligations.
Relevant taxable marketplace sales generally form part of a UK company's overall VAT-taxable turnover.
For certain goods outside the UK sold through an online marketplace and imported to Great Britain in consignments with an intrinsic value of £135 or less, the marketplace generally accounts for VAT at the point of sale.
For consignments above £135, normal import VAT and customs rules generally apply.
Potentially, yes, if the company is VAT registered, entitled to recovery and has the appropriate import VAT evidence.
Potentially, where qualifying UK VAT has been correctly charged and the normal VAT recovery conditions are satisfied.
Potentially. Holding inventory in another country can create local VAT obligations.
Not automatically. The payout is normally the amount remaining after VAT, refunds, fees and other deductions. Your bookkeeping should reconcile the underlying gross sales and deductions.
So, how does VAT work when selling through online marketplaces?
For a straightforward UK-established company selling UK-held stock:
UK company
↓
Goods stored in UK
↓
Sale through marketplace
↓
UK customer
↓
Seller generally accounts for applicable UK VAT
But special marketplace rules can change the position:
Overseas seller + UK stock
↓
Marketplace may account for VAT
and:
Goods outside UK + qualifying consignment up to £135 + UK consumer
↓
Marketplace generally accounts for VAT at checkout
The key is never to assume:
“Amazon collected VAT, so I don't need to worry about it.”
Instead, determine:
Seller location + Stock location + Customer location + Consignment value + Import/export status + Marketplace responsibility
Then reconcile:
Gross sales → VAT → refunds → fees → net payout
For businesses operating across Amazon, eBay, Etsy, Shopify and international fulfilment centres, accurate marketplace reconciliation and stock-location records are essential.
This article provides general information only and does not constitute tax, customs, accounting, financial or legal advice. VAT, marketplace and international ecommerce rules can change and the correct treatment depends on the particular transaction. Check current HMRC guidance or obtain professional VAT advice where appropriate.
