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This article applies to selling in: Japan

JP Consumption Tax Calculation Services Methodology

Last updated on 30 July 2020.

Contents

  1. Purpose
  2. Overview
  3. Seller Tax Obligation Setting
    1. Professional Seller Accounts
    2. Individual Seller Accounts
  4. Determining the Taxing Jurisdiction
    1. Ship-from location:
    2. Ship-to location:
  5. Assigning a Product Tax Code (PTC)
    1. Assigning an Seller Account Default PTC
    2. Assigning an ASIN Level Product Tax Code (PTC)
  6. Determining the Tax Exclusive/Inclusive Price
    1. Tax Exclusive Price Calculation:
  7. Invoices and Credit Notes
  8. Ancillary Charges:
  9. Time of Sale for Consumption Tax Calculation
  10. Refunds
    1. Products shipped using FBA:
    2. Seller-fulfilled products:
  11. Consumption Tax Rate Maintenance

Appendix

  1. Example Invoice

1. Purpose

This help page describes the methodology we apply to calculate consumption tax for offers that sellers sell on Amazon.

Please read this Consumption Tax Calculation Methodology carefully before using Amazon’s Consumption Tax Calculation Service. Sellers are responsible for the accuracy of all calculations, consumption tax reporting and any other consumption tax-related obligations. Sellers should consult a tax advisor or the nearest tax office, if they need assistance in determining their consumption tax obligations. Consumption taxes will be calculated on all transactions occurring on the Japan marketplace but this does not mean the seller is tax obligated. The consumption taxes calculated will be provided to the seller to make a determination to remit to the government or retain in accordance with National Tax Agency guidance.

2. Overview

Amazon will perform consumption tax calculations for all sellers on the Japan marketplace. Amazon does not perform consumption tax calculations in jurisdictions located outside of Japan for the amazon.co.jp marketplace.

Amazon uses a third party calculation engine, Vertex Indirect Tax O Series, to support consumption tax calculations in Japan.

The service includes support for the following consumption tax related functions:

  • Consumption tax rates;
  • Tax jurisdiction determination;
  • Tax exclusive price logic:
    • i.e. how consumption tax will be imputed from the seller’s tax inclusive display price;
  • Product tax codes (PTCs) to support product-specific taxability:
    • e.g. taxable products, vs tax calculation exempt products;
  • The ability to specify a single, default ship from location for seller-fulfilled orders;
  • The ability to set an ASIN/SKU level product tax code (PTC);
  • Consumption tax calculation report;
  • Tax exempt calculations on exported shipments;

Our service does not currently include support for the following calculations and related functions:

  • The ability to specify multiple ship from locations for seller-fulfilled orders;
  • Calculation on PrimeNow transactions;
  • Calculation on digital products and services;
  • Calculation of customs duties due on the importation of goods: e.g. clothing products imported from China into Japan;
  • Post-transaction tax calculation or reporting corrections;

Our consumption tax calculation service relies on the seller’s tax settings. Sellers need to ensure that their information and settings are at all times accurate. We do not represent or warrant that the tax calculations produced by our services will at all times be correct nor verify or correct the information supplied by the seller.

3. Seller Tax Obligation Setting

Amazon provides sellers with the ability to specify their consumption tax obligation status. Effective October 1, 2019, Amazon will begin calculating consumption tax and issuing invoices on behalf of all sellers based on the relevant tax settings on the sellers account. Starting in 2021, Japan Consumption Tax (JCT) numbers will become available. Tax obligated sellers will have the ability to input their JCT numbers on the Tax Obligation Settings page.

Sellers can find their tax obligation setting within Account Information under Consumption Tax Settings.

a. Professional Seller Accounts

All professional seller accounts will automatically be deemed tax obligated. Professional sellers can change their tax obligation settings at any time within their Consumption Tax Settings.

b. Individual Seller Accounts

Individual seller accounts will automatically be deemed not tax obligated. Individual sellers can change their tax obligation setting at any time with their Consumption Tax Settings.

4. Determining the Taxing Jurisdiction

The Vertex jurisdiction selection logic uses information from two transaction-related details to determine the Jurisdiction of taxation.

  • Ship-from location;
  • Ship-to location.

a. Ship-from location:


  1. Products shipped using Fulfillment by Amazon (FBA): The actual ship-from location for shipments originating from an Amazon fulfillment location will be used.
  2. Seller-fulfilled products: The default product ship from location configured within your consumption tax settings will be used.

b. Ship-to location:

The ship-to location is based on the customer-supplied address and postal code. The consumption tax calculation service will calculate consumption tax based on the jurisdiction our system determines to have the highest confidence level as matching the customer-supplied address.

Note: Consumption tax will only be calculated on orders that are shipped into or within the country of Japan.

5. Assigning a Product Tax Code (PTC)

As a system default, the standard rate PTC (A_GEN_STANDARD) will be set as the seller default PTC and will yield the standard consumption tax rate for products shipped within or into Japan.

a. Assigning an Seller Account Default PTC

Sellers can set their seller account default PTC via the Consumption Tax Settings page. A seller account default PTC will be the PTC used in consumption tax calculation for all offers that do not have an offer level PTC assignment. The default Tax Code setting will allow you to set the following PTCs.

A_GEN_STANDARD will yield the 10% consumption tax rate.
A_GEN_REDUCED will yield the 8% consumption tax rate.

Note: All PTC’s must be spelled correctly, as displayed in Seller Central help pages, for them to be effective in consumption tax calculations. If PTC is invalid, seller’s account default PTC will be used to calculate consumption tax.

b. Assigning an Offer Level Product Tax Code (PTC)

The offer level PTC can be set within Manage Your Inventory, files or feed APIs.. The offer level PTC will take precedence over the seller account default PTC. The Product Tax Code setting will allow you to set the three following PTCs:

A_GEN_STANDARD will yield the 10% consumption tax rate.
A_GEN_REDUCED will yield the 8% consumption tax rate.
A_GEN_NOTAX  yield an 0% consumption tax rate.

6. Determining the Tax Exclusive/Inclusive Price

Amazon's consumption tax calculation service uses the seller-provided tax inclusive selling price and the PTC to derive the tax exclusive selling price.

a. Tax Exclusive Price Calculation:

Sellers are expected to provide tax inclusive price targeted at customers on the Japanese marketplace. Generally, tax exclusive price is calculated based on tax inclusive price as follows:

  • We use the PTC to derive the tax exclusive selling price.
    • Example of taxable offer at the standard rate:

      A seller that lists an item at 1080 JPY on Amazon.co.jp, will see the following tax exclusive selling price for an item subject to consumption tax with a PTC assignment of A_GEN_STANDARD: 1080 JPY / (1 + 0.10) = 982 JPY (tax exclusive price)

    • Example of taxable offer at the reduced rate:

      A seller that lists an item at 1080 JPY on Amazon.co.jp, will see the following tax exclusive selling price for an item subject to consumption tax with a PTC assignment of A_GEN_REDUCED: 1080 JPY / (1 + 0.08) = 1000 JPY (tax exclusive price)

    • Example of non-consumption-taxable offer:

      A seller that lists a non consumption taxable item at 1080 JPY on Amazon.co.jp with a PTC assignment of A_GEN_NOTAX, will see tax inclusive selling price as a tax exclusive selling price: 1080 JPY / (1 + 0.00) = 1080 JPY (tax exclusive price)

Note: Amazon Business Sellers

The logic outlined above will be used to determine the tax exclusive item selling price etc, shown to Amazon Business customers on the Amazon website.

7. Invoices and Credit Notes

Effective October 1, 2019, Amazon will begin calculating consumption tax and issuing invoices on behalf of all sellers. The Amazon generated invoices and credit notes will include the following:

  • Tax classification per item
  • Total JCT inclusive amount per JCT rate.
  • Total JCT exclusive amount per JCT rate
  • Total JCT amount per JCT rate

See Appendix below for an example of an Amazon generated invoice.

8. Ancillary Charges:

a. Promotions:

Tax inclusive promotion value is only determined upon the calculation of the final tax inclusive selling price. The consumption tax calculated on the promotion follows the tax rate associated with the item. Once the tax inclusive promotion value is determined, we will use the tax rate associated with the item to derive the tax exclusive promotion value.

Example:

A seller lists an item at 1100 JPY on Amazon.co.jp and sells the item to a customer with a 10% promotion:

Tax exclusive item price calculation: 1100 JPY / (1 + 0.10) = 1000 JPY
Tax inclusive item promotion calculation: 1100 JPY * 0.10 = 110 JPY
Tax exclusive item promotion calculation: 110 JPY / (1 + 0.10) = 100 JPY
Final tax inclusive item price calculation: 1100 JPY – 110 JPY = 990 JPY

b. Shipping Charges:

Shipping charges in Japan treated as always taxable, unless the shipment is destined to a location outside of Japan. Shipping charges are fixed-price inclusive, meaning the price of shipping will not vary based upon the consumption tax result.

Example:

A seller ships a product domestically to a customer located in Japan, where consumption tax is due against shipping fees.

Fixed tax inclusive shipping charge to a JP customer: 500 JPY tax
exclusive shipping price calculation: 500 JPY / (1 + 0.10) = 455 JPY

A seller ships a product internationally to a US based customer, where consumption tax is not due against shipping fees.

Fixed tax inclusive shipping charge to a US customer: 500 JPY tax
exclusive shipping price calculation: 500 JPY/ (1 + 0.00) = 500 JPY

Note: Shipping charges are allocated across all line items in a shipment and consumption tax is calculated individually on the allocated amounts. Due to rounding, there may be small differences when calculating consumption tax on the total shipping charge vs the allocated shipping charge.

c. Gift Wrap Charges:

Gift wrap charges in Japan treated as always consumption taxable, unless the shipment is destined to a location outside of Japan. Gift wrap charges are fixed-price inclusive, meaning the price of gift wrapping will not vary based upon the consumption tax result.

Example:

A seller gift wraps a product and ships it domestically to a customer located in Japan, where consumption tax is due.

Fixed tax inclusive gift wrap charge to a JP customer: 314 JPY
tax exclusive gift wrap price calculation: 314 JPY / (1 + 0.10) = 286 JPY

A seller ships a product internationally to a US based customer, where consumption tax is not due.

Fixed tax inclusive gift wrap charge shipped to a US customer: 314 JPY
tax exclusive gift wrap price calculation: 314 JPY/ (1 + 0.00) = 314 JPY

9. Time of Sale for Consumption Tax Calculation

Consumption tax is pre-calculated at order checkout using the consumption tax calculation rules and rates in effect on the order checkout date. However, the consumption tax actually charged to the customer will be based on the consumption tax calculation rules at the time a payment method charge is authorized.

Depending on how a shipment is fulfilled, payment method charge authorization could occur shortly after an order is placed or immediately prior to product shipment.

Many factors can change between the order checkout date and the payment method charge authorization date. As a result, the pre-calculated tax amount may differ from the amount actually charged. For example - consumption tax calculation rules or consumption tax rates may change and this could lead to an increase or decrease in the consumption tax charged and hence an increase or decrease in the price margin.

Note: Tax is calculated on each line item individually and not on the shipment total. Due to rounding, there may be small differences when calculating consumption tax on the shipment total vs individual line items.

Example:

Tax inclusive item price is 100 JPY, 10 units in 1 order: 100 - 100/( (1 + 0.10) = 10. 10 x 10 =100 JPY for total tax amount.

Item Price Tax Exclusive Consumption Tax Shipping Fee Tax Exclusive Consumption Tax
Calculated from single unit 1,000 910 90 648 590 50
Calculated from Total level 1,000 909 91 648 589 59

10. Refunds

Full refunds will be treated as consumption tax inclusive and consumption tax calculations on full refunds will follow the consumption tax calculation treatment of the original sales transaction to which it relates. Partial refunds will be treated as consumption tax exclusive and consumption tax will be calculated on top of the monetary refund amount entered. Consumption tax calculation on the partial refund will follow the consumption taxability treatment of the original sales transaction to which it relates.

Example (Partial Refund):

A seller wants to issue a partial refund to the customer.

Original sale price: 1100 JPY
Tax exclusive selling price: 1100 JPY / (1 + 0.10) = 1000 JPY
Tax amount: 100 JPY
Partial refund amount: 500 JPY
Partial refund consumption tax calculation: 500 JPY * 0.10 = 50 JPY
Tax Inclusive refund amount: 550 JPY

The customer refund process will depend on whether the product is shipped using Fulfillment by Amazon (FBA) or is seller-fulfilled.

a. Products shipped using FBA:

The consumption tax calculation services will calculate consumption tax on customer returned and non-customer return related refunds and concessions, e.g. a seller issues a partial refund against the product but did not require the customer to return it.

Note: We will not calculate consumption tax on concession/goodwill. Our consumption tax calculation services performs consumption tax calculations on the return of physical goods without regard to the period of time between the original sale and the return.

b. Seller-fulfilled products:

Our consumption tax calculation services will calculate consumption tax on any refunds issued by the seller via Seller Central. All such refunds are issued at the sole discretion of the seller.

Note: We will not calculate consumption tax on concession/goodwill.

11. Consumption Tax Rate Maintenance

Tax rates, as well as consumption tax calculation rules and logic, are supplied by our third party provider, Vertex, which provides monthly updates that we implement approximately three to five days before the end of the calendar month.

Appendix

1. Example Invoice


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