Amazon FBA Explained: How It Works, Costs, and VAT Obligations for Online Sellers

Amazon FBA (Fulfillment by Amazon) is one of the most widely used fulfillment models for ecommerce sellers worldwide. By outsourcing storage, shipping, customer service, and returns to Amazon, sellers can focus on product development and market expansion.

However, for sellers expanding into Europe, Amazon FBA is not only a logistics decision — it is also a tax and compliance decision.

Storing inventory in Amazon fulfillment centers across the EU often creates VAT registration and ongoing filing obligations in multiple countries. These requirements are frequently overlooked in early planning stages and may later result in account restrictions, penalties, or operational disruptions.

This guide explains what Amazon FBA is, how it works, its costs and benefits, and the VAT implications EU sellers should understand before getting started.

What Is Amazon FBA?

Amazon FBA stands for Fulfillment by Amazon. It is a service where sellers send their products to Amazon fulfillment centers, and Amazon manages the entire order fulfillment process.

With Amazon FBA, Amazon handles:

1. Inventory storage
2. Order picking, packing, and shipping
3. Customer service
4. Returns and refund

For many sellers, FBA provides access to Amazon’s logistics network and Prime-eligible delivery, helping increase conversion rates and customer trust.

How Amazon FBA Works: Step by Step

1. Sending inventory to Amazon warehouses

Sellers prepare and ship their products to Amazon fulfillment centers. Depending on the fulfillment program used, inventory may be stored in one or multiple countries.

2. Order fulfillment by Amazon

When a customer places an order, Amazon picks, packs, and ships the product directly to the customer.

3. Customer service and returns

Amazon handles customer inquiries, refunds, and returns, reducing operational workload for sellers.

This model allows sellers to scale efficiently, especially when selling across borders.

Amazon FBA Fees: What Does It Cost?

Amazon FBA involves several cost components that sellers should evaluate carefully.

Fulfillment fees

Charged per unit based on product size and weight. These fees cover picking, packing, shipping, and customer service.

Storage fees

1. Monthly storage fees based on inventory volume
2. Higher fees during peak seasons
3. Long-term storage fees for slow-moving inventory

Additional costs to consider

1. Product preparation and labeling
2. Inventory removal or disposal fees
3. Cross-border inventory transfers

Understanding these costs is essential for pricing products accurately and maintaining healthy margins.

Pros and Cons of Amazon FBA

Advantages of Amazon FBA

1. Prime-eligible fast delivery
2. Reduced logistics and operational complexity
3. Improved customer trust
4. Easier scaling across markets

Limitations and risks

1. Limited control over inventory placement
2. Storage-related costs
3. VAT and compliance obligations when inventory is stored abroad

Amazon FBA is a powerful growth tool, but it requires careful planning beyond logistics.

Is Amazon FBA Right for You?

Amazon FBA is well-suited for sellers who:

1. Want to scale quickly
2. Sell standardized products with steady demand
3. Rely heavily on Amazon as a primary sales channel

It may be less suitable if:

1. Margins are very tight
2. Inventory turnover is slow
3. Compliance readiness is limited

Before choosing FBA, sellers should assess both operational and regulatory impacts.

Amazon FBA & VAT: What Many Sellers Overlook

For sellers expanding into Europe, VAT is often the most underestimated aspect of Amazon FBA.

Why Amazon FBA triggers VAT obligations in the EU

When inventory is stored in an EU country, sellers are typically required to:

1. Register for VAT in that country
2. File periodic VAT returns
3. Comply with local reporting requirements

Programs such as Pan-European FBA can further increase VAT exposure by distributing inventory across multiple countries.

Common VAT mistakes made by FBA sellers

1. Shipping inventory before VAT registration is completed
2. Registering VAT in incorrect countries
3. Missing VAT filing deadlines
4. Incorrect use of OSS or Non-Union OSS schemes

These issues often surface only after Amazon compliance checks or tax authority audits.

How to manage VAT compliance when using Amazon FBA

Successful FBA sellers typically:

1. Map inventory flows before launching
2. Register VAT where inventory is stored
3. Set up recurring VAT filings
4. Monitor changes as fulfillment networks expand

VAT planning should be part of the initial FBA strategy, not a reactive step.

Amazon FBA & EPR Compliance

In addition to VAT, many Amazon FBA sellers in Europe are also subject to Extended Producer Responsibility (EPR) obligations.

EPR is an environmental compliance framework that requires sellers to take responsibility for the waste generated by their products and packaging. For Amazon sellers, EPR compliance has become increasingly important due to stricter enforcement across EU countries.

Why Amazon FBA sellers are affected by EPR

If you sell products through Amazon FBA in the EU, you may be considered a “producer” under local EPR regulations, even if you are not based in Europe.

EPR obligations can apply when:

1. You place packaged goods on the EU market
2. You sell products containing batteries or electronics
3. You use Amazon fulfillment centers to distribute products locally

This means sellers may need to register for EPR schemes in each relevant country and submit periodic reports.

Common EPR categories impacting Amazon FBA sellers

Depending on the products you sell, EPR requirements may include:

1. Packaging EPR (most common)
2. WEEE (electrical and electronic equipment)
3. Battery EPR
4. Textiles or other product-specific schemes

Amazon has increasingly required sellers to provide valid EPR registration numbers in Seller Central. Failure to comply can result in:

1. Listing suppression
2. Fulfillment restrictions
3. Account-level enforcement actions

How EPR compliance differs from VAT

While VAT is tax-related and transaction-based, EPR is product and environmental compliance–driven.

Key differences include:

1. EPR obligations depend on product type, not sales value
2. Registration and reporting are often handled by local authorities or Producer Responsibility Organisations (PROs)
3. Compliance is required even if sales volumes are low

For Amazon FBA sellers, VAT and EPR are parallel obligations — one does not replace the other.

Managing VAT and EPR together for Amazon FBA

Successful EU sellers typically manage VAT and EPR as part of a single compliance strategy:

1. VAT registration and filing for inventory locations
2. EPR registration for applicable product categories
3. Ongoing reporting aligned with Amazon’s compliance checks

Addressing both requirements early helps sellers avoid interruptions to fulfillment and maintain long-term marketplace access.

How VATAi Supports Amazon FBA Sellers

VATAi supports Amazon FBA sellers with end-to-end compliance solutions designed for selling in Europe. We help sellers manage both tax and product compliance obligations that arise when using Amazon fulfillment networks across multiple EU countries.

VAT compliance support for Amazon FBA

VATAi assists sellers with:

1. VAT registration in EU countries where inventory is stored
2. Ongoing VAT filings and deadline management
3. VAT registration transfers from existing providers
4. Support for OSS and Non-Union OSS schemes

Our approach helps sellers maintain visibility and control as their fulfillment footprint expands.

EPR compliance support for Amazon & Marketplace Sellers

For sellers subject to Extended Producer Responsibility (EPR) requirements, VATAi provides:

1. EPR registration for applicable categories, including Packaging, WEEE, and Batteries
2. Country-specific compliance support aligned with local regulations
3. Assistance with reporting obligations required by authorities or Producer Responsibility Organisations (PROs)
4. Support for Amazon compliance checks and documentation requests

We help sellers understand where EPR applies and how to remain compliant as enforcement increases across EU marketplaces.

A unified compliance approach for scalable growth

Amazon FBA sellers often face multiple overlapping obligations across different countries. VATAi helps consolidate VAT and EPR compliance into a structured, manageable framework, reducing operational risk and preventing marketplace disruptions.

By addressing both VAT and EPR requirements early, sellers can focus on scaling their Amazon business with greater confidence and long-term stability.

Key Takeaways for New Amazon FBA Sellers

1. Amazon FBA simplifies logistics, not tax compliance
2. Storing inventory in the EU usually creates VAT obligations
3. Early VAT planning reduces operational risk and cost
4. The right compliance setup supports scalable growth

If you are planning to use Amazon FBA in Europe, understanding VAT requirements early can help prevent future disruptions and support sustainable expansion.

FAQ

Q1: What is Amazon FBA in simple terms?

Amazon FBA is a service where Amazon stores your products, ships customer orders, handles customer service, and manages returns for you.

Q2: How much does Amazon FBA cost?

Amazon FBA costs include fulfillment fees per unit, storage fees based on inventory size and duration, and additional fees such as long-term storage or inventory removal.

Q3: Is Amazon FBA suitable for beginners?

Yes. Amazon FBA is commonly used by beginners because it reduces logistics complexity. However, beginners should also understand tax and compliance obligations before scaling.

Q4: Does Amazon FBA require VAT registration in Europe?

In most cases, yes. If inventory is stored in an EU country, sellers are generally required to register for VAT and file VAT returns in that country.

Q5: Can OSS be used with Amazon FBA?

OSS can simplify VAT reporting for distance sales, but it does not replace local VAT registration requirements when inventory is stored in a country.

Q6: Is Amazon FBA better than FBM?

Amazon FBA offers scalability and convenience, while FBM (Fulfilled by Merchant) provides more control. The best choice depends on business model, margins, and compliance readiness.

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