Amazon FBA Accounting: VAT, Inventory and Multi-Currency Sales

You open Amazon Seller Central, see a healthy pile of sales, then realise you have no idea how much of that money is actually yours.

Between referral fees, FBA fulfilment fees, storage charges, VAT across different regions and currency conversions that change constantly, FBA accounting can eat the hours you would rather spend sourcing products, improving listings or negotiating with suppliers.

Why FBA Bookkeeping Is Harder Than Normal Ecommerce

A standard ecommerce store might give you a payout, a processing fee and a cost of goods figure. Amazon FBA gives you dozens of fee types, stock sitting in fulfilment centres, refunds, reimbursements and sales settled in different currencies.

If you are still pulling a single “Amazon” line into Xero or QuickBooks each fortnight, your accounts are probably not telling the full story. Costs can be understated, profit can be overstated and your margin reports can become misleading.

The Three Layers You Need to Track

Good FBA bookkeeping needs more detail than a simple payout total. At minimum, you need to track:

• Gross sales by marketplace, such as Amazon UK, EU marketplaces and US marketplaces
• Fees by type, including referral fees, FBA fees, storage, advertising, refunds and reimbursements
• Stock movements in and out of fulfilment centres

Miss any of these and your margin reports can lie to you. You may think a SKU is profitable when Amazon fees, advertising and storage are quietly eating the margin.

Inventory: Stock and Work in Progress

Inventory is usually an asset on your balance sheet, not an immediate expense. You generally expense stock when it sells, through cost of goods sold.

This matters because buying £30,000 of stock does not automatically mean £30,000 comes off your profit straight away. Unsold inventory usually remains on the balance sheet until sold, written down or disposed of.

Valuing Your FBA Stock

You need the landed cost per SKU. That means the full cost of getting each unit into a saleable position, not just the supplier invoice.

Landed cost can include:

• Supplier invoice cost
• Shipping and freight
• Import duty
• Freight forwarder fees
• Inspection costs
• Packaging or preparation costs

If you ship 1,000 units at £4 each and spend £1,200 getting them into Amazon, your per-unit cost is £5.20, not £4.

Work in progress can also matter if you do assembly, bundling or private labelling. Components sitting in your garage or prep centre waiting to be kitted up may need to be tracked before they become finished goods.

Tools That Make This Bearable

Tools such as A2X, Link My Books and Sellerboard can connect Amazon data to Xero or QuickBooks and split settlements into proper categories.

The right setup can help you separate:

• Sales by marketplace
• Amazon fees by type
• Refunds and reimbursements
• Advertising spend
• VAT and tax adjustments
• Multi-currency payouts

Manual journaling of Amazon settlements is possible, but it is rarely the best use of your time once order volume grows.

VAT Across Multiple Regions

If your VAT taxable turnover goes over the HMRC registration threshold in any rolling 12-month period, you must register for UK VAT. That rolling test catches sellers out because it is not based on your accounting year or tax year.

Check the latest VAT threshold guidance on GOV.UK when monitoring turnover.

Once registered, you usually need to charge VAT on taxable sales and may be able to reclaim VAT on eligible business costs where VAT has been charged and you hold valid invoices.

Selling Into the EU

Post-Brexit ecommerce VAT can become complicated quickly. If you sell into the EU, your position can depend on where stock is held, how it is shipped and where your customers are based.

Areas to review include:

• Local VAT registration where goods are stored in an EU country
• One Stop Shop rules where relevant
• Import One Stop Shop rules for certain low-value goods
• Marketplace facilitator rules
• Amazon fulfilment settings and cross-border stock movements

Because the rules are fact-specific, overseas VAT should be reviewed before you activate fulfilment programmes that move stock between countries.

UK VAT Schemes Worth Knowing

The Flat Rate Scheme rarely suits Amazon FBA sellers because input VAT on stock purchases and other costs can be substantial. Standard VAT accounting is often more appropriate where you need to reclaim VAT on inventory, Amazon fees and business expenses.

That said, the right VAT approach depends on your margins, suppliers, product type, sales channels and stock flow. Review this before registering or changing schemes.

Our VAT guide for Amazon FBA sellers covers the issue in more detail.

Amazon's Fee Stack

Every Amazon sale can carry multiple fees. Your bookkeeping should separate them so you can see which SKUs actually make money.

Referral Fees

Referral fees are Amazon's commission, usually based on the product category. This is a selling expense, not cost of goods sold.

FBA Fulfilment Fees

FBA fulfilment fees cover pick, pack and shipping charges based on size, weight and fulfilment type. Split these into their own account so you can see whether oversized or low-margin products are being squeezed.

Storage Fees

Monthly storage can look small until slow-moving stock builds up. Long-term storage and aged inventory fees can become painful if dead stock is not monitored.

Advertising

Sponsored Products, Sponsored Brands and display advertising should be tracked carefully. Ideally, advertising should be reviewed by SKU or campaign so you can see whether ad spend is supporting profit or hiding poor margin.

Multi-Currency Bookkeeping in Xero and QuickBooks

Xero and QuickBooks Online both support multi-currency on certain plans. If you sell through non-UK marketplaces or receive payouts in EUR, USD or other currencies, turn multi-currency on before the data becomes messy.

A clean currency flow should show:

• The marketplace sale in the relevant currency
• The Amazon payout at the correct exchange rate
• The conversion into GBP
• Any realised foreign exchange gain or loss

Worked Example: Foreign Exchange Loss

Imagine you receive a EUR 10,000 Amazon Germany payout when the exchange rate records it as £8,547. Later, you convert the euros into GBP and receive £8,403.

The £144 difference is a realised foreign exchange loss. Your bookkeeping software should post that automatically when the conversion is recorded properly.

This matters because foreign exchange movements can affect taxable profit. Ignoring currency differences can make your accounts inaccurate, especially as overseas sales grow.

Making Tax Digital

Making Tax Digital for Income Tax is being phased in for sole traders and landlords above HMRC's qualifying income thresholds. It requires digital records and quarterly updates using compatible software.

Amazon sellers can be affected earlier than expected because qualifying income is based on income before expenses, not profit. High turnover and low margin still need proper digital records.

If you are a limited company, Making Tax Digital for Income Tax does not apply in the same way, but VAT and Corporation Tax records still need to be digital, accurate and up to date.

Read HMRC's latest Making Tax Digital guidance or see our Making Tax Digital service.

FAQ and Quick Summary

Do I need to register for VAT in every EU country I sell to?

Not always. It depends on where stock is stored, where sales are made and which VAT schemes apply. Holding stock in another country can create local VAT obligations, so check before expanding fulfilment settings.

Are Amazon referral fees tax-deductible?

Yes. Genuine business fees such as referral fees, FBA fulfilment fees, storage fees and advertising costs are usually deductible against trading profit.

Should I use Xero or QuickBooks?

Either can work. The integration tool and setup matter more than the ledger choice. A2X or Link My Books can be more important than whether the final accounts sit in Xero or QuickBooks.

When do I record inventory as an expense?

Usually when the unit sells, through cost of goods sold. Until then, inventory generally sits on the balance sheet as an asset.

Get Your FBA Numbers Sorted

FBA accounting done properly shows which SKUs actually make money, keeps HMRC happy and gives you confidence to reinvest. Done badly, it can hide losses for months.

If you would rather let a specialist handle the bookkeeping, VAT, inventory and multi-currency side, see our Amazon FBA accountant page.