Understanding the digital services tax and digital services fee is crucial for anticipating and preparing for the upcoming Amazon fee changes. Here are some essential things you should know. 

What is Digital Services Tax (DST)

Before discussing Amazon’s upcoming digital services fee, it is essential for you, as an Amazon seller, to understand the concept of digital services tax (DST). Understanding DST ensures you are well-informed and proactive in preparing for the changes ahead. 

DST is a global tax initiative governments impose on certain digital services provided by multinational technology giants like Amazon, Google, and Facebook. This tax is levied on the gross revenues generated from online activities such as advertising, digital sales, and other digital services provided by tech companies to users within a specific jurisdiction.

The primary objective of DST is to ensure that digital companies, which often operate across borders, pay their fair share of taxes in the countries where they generate significant income. To provide a comprehensive view, here’s a  list of countries with DST policies and their corresponding rates:

France: France was among the first countries to implement the digital services tax. In 2019, it implemented a 3% tax on revenues from digital services.

Canada: Following the global trend, Canada also joined the league of countries that introduced digital services tax. It imposes a 3% tax on certain online revenues.

United Kingdom: The United Kingdom introduced the digital services tax in 2020, and the government imposes a 2% tax on revenues generated from social media, search engines, and online marketplaces.

Italy: Like the UK, Italy implemented DST in 2020, levying a 3% tax on specific digital services.

Spain: In 2021, Spain introduced DST and charged a 3% tax for digital services. 

Other countries, including India, Turkey, Austria, Indonesia, and Hungary, have also implemented digital services, ranging from a 1% to 30% tax rate. These countries implemented digital services tax as a temporary measure until a global tax framework could be implemented. 

As the digital services tax is implemented in specific jurisdictions, the guidelines for its application can vary significantly. To prevent confusion among sellers, Amazon has introduced a fixed fee structure called the Digital Services Fee.

Understanding Amazon Digital Services Fee, How Does Amazon DSF Work? 

It is already apparent from the discussion above that Amazon’s digital services fee is Amazon’s response to the digital services tax implemented by several countries, including Canada, the United Kingdom, France, Italy, and Spain. This new Amazon selling fee affects the cost of items Amazon sellers sell in certain countries and stores. 

It is important to note that the Amazon DSF is built on two key components, providing a predictable structure for sellers to plan their business strategies. These components are:

• The seller’s country of establishment
• The specific Amazon store where the products are sold

The Amazon DSF is applied as a percentage increase, not directly to the item price, but to the following per-unit fees:

• Selling on Amazon fees: Referral fee, fixed closing fee, variable closing

fee, and get-paid-faster fee

• FBA fees (for the UK and France only): FBA fulfillment fee and shipping chargeback fee

For example, if your business is established in the United States and you are selling an item in the UK store (amazon.uk), you can expect a 2% digital services fee to be applied to Selling on Amazon fees and FBA fees. While this fee may seem like an additional cost, it is a predictable and manageable charge for the services provided.

For instance, if the referral fee is £2.25 and the FBA fulfillment fee is £3.30, a 2% DSF will be added to each of these Amazon fees.

£2.25 (referral fee) x 2% (DSF) = £0.045

£3.30 (FBA fulfillment fee) x 2% (DSF) = 0.066 

£0.066 + £0.045 = 0.11 is the Digital Services Fee

To simplify the impact of the digital services fee, here is a breakdown of how it will affect sellers with businesses established in specific countries:

If your store is established in the UK, a 2% digital services fee will be added to your Selling on Amazon and FBA fees for sales in other Amazon stores, such as the UK, France, Italy, Spain, Canada, United States, Germany, Belgium, Sweden, Netherlands, Poland, and Mexico.

If your business is established in France, a 3% fee will apply to your Selling on Amazon and FBA fees for sales in stores such as the  UK, France, Italy, Spain, Canada, United States, Germany, Belgium, Sweden, Netherlands, Poland, and Mexico.

If your store is based in Italy, Spain, or Canada, you’ll also face a 3% fee on your Selling on Amazon fees for sales in the UK, France, Italy, Spain, Canada, United States, Germany, Belgium, Sweden, Netherlands, Poland, and Mexico.

If your store is in any other country, a 2% fee applies to your Selling on Amazon and FBA fees for sales in the UK and France, and a 2% fee for sales in Italy, Spain, and Canada and this will only be applied to Selling on Amazon fees.

Businesses established in a country that has not introduced a digital services tax will not be charged fees. Moreover, the digital services fee will not apply to Amazon sellers who do not sell in the UK, France, Italy, Spain, and Canada stores.

Amazon has provided a table for reference, making it easier for Amazon sellers to digest this new Amazon fee update. You can check the table below:

Table Adapted from Amazon Digital Service Fee Page

How Does Amazon DSF Affect Sellers?

The Amazon Digital Services Fee (DSF) will affect international sellers operating in Amazon’s US stores and countries with Digital Services Tax (DST). The introduction of the DSF aims to provide a clearer and more predictable fee structure for sellers regarding their Amazon selling fees. 

It is important to note that the digital service fee, which will be implemented on October 1, 2024, does not affect domestic sales for Amazon businesses established in the United States and likewise selling in the US store (amazon.com).

Staying Ahead: Navigating Changes with Seller Tools 

By understanding how the digital services fee is applied and where it affects your business, you can stay ahead of the changes and maintain profitability. Utilizing Amazon’s tools, such as the Revenue or FBA Calculator and Amazon repricers, will help you monitor these fees and make informed decisions about your pricing, sales, and expansion strategies.

Repricers and automation tools are pivotal in helping sellers adapt to the DSF. They are instrumental in ensuring businesses remain competitive while safeguarding their profit margins.

On average, Amazon sellers prepare around $500 to $3,000 (USD) in order to launch their Amazon store and operate with substantial Amazon inventory. This is especially true for online sellers who chose to enroll in the Amazon FBA program.                      

Getting started with Amazon FBA also means being acquainted with the Amazon selling fees that accompany the Amazon seller program. For both newbie and tenured Amazon sellers, the Amazon FBA calculator is a helpful tool to calculate potential fees, costs, and profit. 

Amazon Fees Normally Shown by the FBA Calculator

The FBA profit calculator is limited when it comes to the data it takes into account and the output it forecasts. Amazon fees are calculated using the FBA calculator and include the referral fee, fulfillment fee, and variable closing fee.    

Since the Amazon FBA calculator is somewhat limited, Amazon sellers sometimes overlook other areas of the business that incur additional costs or the so-called Amazon hidden costs.    

If you wish to estimate your FBA Costs, CLICK HERE! 

Hidden Amazon Selling Fees You Should Know About | Amazon Hidden Costs

 Here are some of the Amazon fees dubbed by sellers as Amazon hidden costs on Amazon: 

Selling on Amazon Fees #1: Shipping Expenses

When discussing shipping expenses, you might immediately think about shipping costs or the fulfillment fee. However, the shipping expenses discussed here pertain to separate shipping expenses that most newbie sellers often forget about during the planning stage of their Amazon business.

Transporting your Amazon inventory products can be quite expensive, especially when sending your inventory items to multiple Amazon fulfillment centers. For that matter, it is important to choose your courier in relation to the number of shipped items.    

Top Amazon sellers avoid sending their voluminous inventory products via UPS to lessen the shipping costs. Experienced sellers rely either on less than truckload (LTL) or less than container (LCL) freight to reduce shipping expenses. 

Selling on Amazon Fees #2: Opening a Bank Account 

For those sellers not based in the United States, but selling on Amazon US, opening a US bank account is necessary. Alternatively, you can transfer money for the initial deposit and the monthly maintenance fees (for a premium account).

Similarly, foreign sellers will also have to set up a bank account or use online financial service platforms, like Payoneer or Paypal to pay Amazon as well as their suppliers based abroad. 

Regardless of the payment method, setting up bank accounts and online payment services will incur expenses in the form of maintenance, conversion, or transaction fees

Selling on Amazon Fees #3: Amazon Seller Tools Subscription

What makes the Amazon marketplace unique and highly preferred by online sellers is the array of seller tools available in the market. These tools help Amazon sellers to become more efficient and effective with their Amazon business strategies. 

Although Amazon provides free to use Amazon seller tools, like their Amazon repricer and FBA profit calculator, they have limited features as compared to subscription-based Amazon seller tools.

Subscription-based repricers for example offer better features and functionalities that help enhance the repricing strategy of Amazon sellers. Apart from a repricing tool, sellers may also benefit from other subscription-based seller tools such as feedback tools, PPC tools, and new product development and keyword research tools. 

Selling on Amazon Fees #4: Amazon Returns 

As mentioned, the Amazon FBA calculator has a limited scope. When it comes to returns and damaged goods, you cannot rely on the FBA revenue calculator.      

If you are new to Amazon, you should prepare for Amazon returns. 

For newbie sellers, it is important to take note of Amazon.com Returns Policy, especially that Amazon makes it easier for customers to make product returns. 

Selling on Amazon Fees #5: Brand Registry Expenses 

Another avenue that leads to expenses for Amazon sellers is the brand registry. Brand registry cost is among the factors not included within the FBA calculator. 

Generally, applying for the Amazon brand registry will not cost you. However, sellers will have to pay for one of its requirements, which is the trademark registration with the United States Patent and Trademark Office (USPTO). 

For trademark registration, there are two initial application filing options. The first option would be TEAS Plus, which would cost around $225 per class of goods/services. The second option would be TEAS Standard, costing $275 per class of goods/services. 

Selling on Amazon Fees #6: Advertising Expenses

After launching your Amazon product online, it is not enough to solely rely on organic search results. Regardless of your Amazon SEO, your competitors will likely be advertising on Amazon, either through Amazon Sponsored Products or Brands. 

If you wish to increase your Amazon sales, then an advertising campaign is a must. Such a process will cost you, depending on the type of ad campaign.

Some sellers even go beyond the usual PPC campaigns and Amazon product display ads. There are some aggressive Amazon sellers who run affiliate marketing programs and even create a landing page for their Amazon products. Hence, resulting in additional expenses. 

Selling on Amazon Fees #7: Overhead Expenses

Unlike traditional businesses, overhead expenses in eCommerce are minimal. However, they are still expenses that require payment.

Obviously, overhead expenses are not covered by the FBA revenue calculator. Hence, due diligence is necessary. 

Some of the common overhead expenses encountered by top Amazon sellers include professional product photography fee, seller’s permit (may vary per US State), intermediate warehouse costs (serves as a center for inspection and labeling of items before being sent to Amazon fulfillment center), business structure fees, and business operation & maintenance fees. 

Priceless Investment

Personal time is considered one of the most expensive resources involved in the Amazon business. If you are still a budding entrepreneur trying to make it big in Amazon, you will sacrifice personal time.

Attending seminars, learning new guidelines and ways of improving your business, participating in trade shows, and even coaching are some of the events that sellers spend time on. However, this is a priceless investment.