Online retail is booming, and more and more sellers are offering their products via platforms like Amazon, Shopify, or their own online shops. However, business success also brings growing tax obligations. One of the most complex and often underestimated is VAT (Value Added Tax).

Especially in e-commerce, special VAT rules apply – from cross-border shipments and Amazon FBA storage in multiple countries to the One-Stop-Shop (OSS) scheme that came into effect on July 1, 2021.

This article walks you through the key VAT concepts, common pitfalls, and how digital solutions like KudTax can help you automate your accounting.

1. What is VAT and how does it work?

VAT (Value Added Tax) is a consumption tax applied to nearly all sales of goods and services. Businesses charge VAT on their sales and pay it to the tax authority.

Germany applies two VAT rates:

19% standard rate: Applies to most goods and services
7% reduced rate: Applies to items like books, food, and artwork

Note: As a business, you act as a VAT collector. You charge VAT from your customers and forward it to the tax office. At the same time, you can reclaim VAT you paid on business-related expenses (input VAT).

According to Section 1(1)(1) of the German VAT Act (UStG), VAT is levied on "supplies and other services performed for consideration by a trader within Germany as part of their business".

If you engage in an independent commercial activity as defined by Section 2 UStG, you’re required to charge VAT – even if you're a small shop or just starting out.

2. Small Business Regulation – Opportunity or Risk?

If your revenue in the previous year was less than €22,000 and is expected to stay below €50,000 in the current year, you may apply the small business regulation under Section 19 UStG. You won’t charge VAT, but you also can’t deduct input VAT.

This may sound appealing, but there are downsides in e-commerce:

You can’t reclaim input VAT, which increases your costs
Marketplaces like Amazon may treat you as VAT-liable anyway
You may appear less professional to B2B customers

Tip: Consider if the regulation makes sense long term – most growing sellers switch to standard VAT sooner or later.

3. Selling Across the EU: One-Stop-Shop (OSS)

A major change came into force on July 1, 2021: the One-Stop-Shop (OSS) scheme replaced national distance selling thresholds.

Previously, you had to register for VAT in each EU country where you sold goods beyond certain thresholds. OSS simplifies this process:

Benefits of the OSS scheme:

Single VAT return submitted via Germany's Federal Central Tax Office (BZSt)
No more local VAT registrations in each EU country
Applies to all cross-border B2C sales within the EU

Note: Once your total EU-wide B2C sales exceed €10,000 (net), OSS becomes mandatory unless you register separately in each country.

A distance sale under Section 3c UStG occurs when goods are shipped by or on behalf of the supplier from one EU country to a private customer in another EU country.

The OSS procedure is laid out in Section 18j UStG, which applies to traders making distance sales under Section 3c.

To comply with OSS, you must document all transactions precisely, configure your systems accordingly, and handle different local VAT rates across the EU.

4. Amazon FBA & Foreign Warehouses – When Do You Need to Register?

Using Amazon FBA (Fulfilled by Amazon) often means your products are stored in multiple countries like Poland, Czechia, or France. When goods are moved to a foreign warehouse, it triggers:

An intra-community transfer of goods
A VAT obligation in the warehouse country
Local VAT registration may be required
Filing local VAT returns and EC Sales Lists

Many sellers are unaware that Amazon can shift storage locations automatically – leading to unexpected tax liabilities and penalties.

A warehouse transfer within the EU can be classified as an intra-community supply if the conditions in Section 6a UStG are met – including valid VAT IDs for the recipient.

5. Sales Outside the EU: Understanding Third Country Exports

Sales to countries like Switzerland, the UK, the USA, or Canada qualify as exports. These are generally zero-rated for VAT, but only under strict conditions.

Requirements for VAT exemption:

The buyer is located outside the EU
The goods are actually exported
You can provide export proof (e.g., tracking, customs docs)

Missing proof means the sale is taxed as domestic – risking retroactive VAT.

6. Common VAT Pitfalls in e-Commerce

Mistakes in VAT handling are common in e-commerce. Frequent issues include:

Incorrect VAT codes in your accounting system
Missing OSS registration when threshold exceeded
Incomplete invoices (e.g., missing VAT ID or rates)
Untracked warehouse transfers (especially via Amazon)
Missed filing deadlines

Advice: Avoid manual spreadsheets and legacy tools – automation saves time and reduces risk.

7. Automate Your VAT with KudTax

As you've seen, VAT compliance in e-commerce is complex. But you don’t need to become a tax expert – you just need the right tools.

KudTax is a cloud-based solution built specifically for online sellers. Whether you sell on Amazon, Shopify, WooCommerce, or other platforms – KudTax automates your VAT handling and keeps you compliant.

KudTax helps you with:

Automatic import of your sales data from multiple platforms
Smart assignment of correct VAT rates (including OSS handling)
Monitoring of Amazon FBA warehouse movements
Generating correct VAT invoices
Export-ready reports for your accountant

With KudTax, VAT becomes a background process – so you can focus on growing your business.

Conclusion: VAT is a Must – But It Doesn’t Have to Be Difficult

VAT is one of the biggest challenges in e-commerce. Between OSS, EU-wide compliance, warehouse transfers, and regular filings, it’s easy to lose track. But if you set up proper systems and automate your processes from day one, you’ll save time and avoid stress.

KudTax gives you the tools to stay on top of your VAT and e-commerce bookkeeping – reliably, efficiently, and tailored to the needs of online sellers.

Get started with KudTax today and streamline your e-commerce accounting the smart way.

Included SEO Keywords: VAT, online shop, online sellers, e-commerce, bookkeeping for Amazon, Amazon FBA accounting, automated bookkeeping, invoice management, One-Stop-Shop

KudTax Blog

VAT in e-Commerce: What Online Sellers Need to Know