Amazon provide a Marketplace Tax Collection service in some US States. Those tax amounts paid by Amazon need to be reported but are already paid, reducing the outstanding tax liability.
Once configured, Brightpearl will account for withheld tax values. A credit card account code and a payment method should be created specifically for recording Amazon withheld tax.
How it works
When an Amazon order downloads into Brightpearl the full tax amount will be recorded on the sales order. Any withheld tax amount will not be identified until the payment download happens.
Since the order displays the tax charged it ensures that any order documentation contains the tax details and that once invoiced the correct tax liability is accounted for. When the payments download the tax liability will be reduced to indicate that it has already been paid.
The Amazon settlement report, used for downloading payments, states the withheld tax amount, any fees subtracted and the remaining balance which is transferred to the bank - the total equals the order value. For example, and order for $100 plus $10 tax will download into Brightpearl to show the order of $110. When the payment download happens the order will be marked as paid in full with an order payment for $100 cash transferred to the bank and an additional order payment of $10 for the withheld tax (assuming no fees).
How to configure Amazon withheld tax
- Go to Accounting > Chart of accounts.
- Choose the account type of credit card (this is an account type which is treated like a bank and a liability).
- Click to add a new account code. Enter a name for the account, for example "Amazon withheld tax" and save.
- Next, create a payment method. Go to Settings > Company > Payment methods.
- Click to add a new payment method and make the following entries:
Name: Name the method, for example "Amazon withheld tax"
Code: Give the method a code, the account code can be used, or something else.
- Select the new account code and save.
- Next, assign the payment method to the Amazon channel. Go to Settings > Brightpearl apps > Amazon.
- Click to edit the relevant Amazon channel and select the new payment method as the Amazon withheld tax payment method.
Reporting Amazon withheld sales tax
The sales tax liability code (2200) will state the total tax liability including Amazon withheld tax. The Amazon withheld tax amount will need to be subtracted from this amount to get the true liability. As long as the Amazon withheld tax payment method used has been configured with a separate account code used solely for this purpose, the total amount will be visible on the balance sheet and the remaining tax liability easily calculated.
Using the sales tax detail report
Invoices from the Amazon sales channels can be filtered out on the sales tax detail report. Once the report is exported, invoices for sales in the states where Amazon withholds tax can be identified using the state column.
Using the sales tax report
This report will display the total reportable tax including tax already withheld and paid by Amazon. It should be used in conjunction with the sales tax detail report and the Amazon withheld tax account code to ensure figures are suitably adjusted.
Using the customer payment report
The payment list at Sales > Order payments, filtered by Amazon withheld tax payment method, will provide a detailed list of Amazon withheld tax values for each order.
Using the general ledger
The general ledger filtered by the Amazon withheld tax account code, will provide a detailed list of Amazon withheld tax values for each order.
End of period adjustment
At the end of a tax period you may wish to reset the Amazon withheld tax account and balance it against the main tax liability account. Do this by entering a manual journal and debiting the Amazon withheld tax account with the total for the period and crediting the main tax liability account for the same amount.
Why does an Amazon order show the tax amount when it was withheld?
Even though Amazon withheld an amount for tax it still needs to be recorded, accounted for and reported in Brightpearl. If the tax with simply excluded from the order in Brightpearl there would be no record that you ever charged or paid tax.