Amazon is about to be clobbered with a big new tax, and its first instinct is to slam third-party sellers with higher costs
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- Amazon said it is going to raise fees for its third-party sellers in France by 3% after being hit by the new digital services tax in the country.
- The new tax was approved by the French Senate in July. It requires tech firms with global revenue of more than €750 million, or $831 million, to pay a 3% tax on sales.
- The tax is unusual in that it relates to revenue, not profit. Amazon, Facebook, and Google are all fighting to resist the levy.
- Amazon's plan to pass the buck to third-party sellers could further raise tensions with firms that do business on its platform.
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Amazon is about to be stung with a new tax in France but rather than absorb the cost itself, it's passing it on to third-party sellers in a move that could further raise tensions with firms that do business on its platform.
The French government last month approved plans to clobber tech companies with global sales of more than €750 million ($831 million), with a 3% levy on their revenue, in addition to the more traditional method of taxing profit.
Amazon, Facebook, and Google are all fighting to resist the levy, submitting evidence last week to an investigation by US Trade Representative Robert Lighthizer into France's new tax plan.
In its submission, Amazon said third-party sellers in France will see fees increase by 3% from October 1 to account for the new digital services tax. On Monday, Jeff Bezos' company doubled down on this plan.
"Because we operate in the highly competitive and low-margin retail industry and invest heavily in building tools and services for selling partners and customers, we cannot absorb an additional consumption tax that is based on revenues instead of profits," a spokesperson for the company told Forbes.
"This tax is aimed squarely at the marketplace services we provide to businesses, so we had no choice but to pass it down to selling partners." Amazon is expecting this to trickle down to consumers in France as small businesses are likely to raise prices to account for these higher fees.
Amazon did not immediately respond to Business Insider's request for comment.
"Amazon will use them when necessary and dispose of them when appropriate. There's no love there."
Amazon's plan to pass the cost of France's new tech tax onto French businesses may be a lobbying technique, but it risks heightening existing tensions with third-party sellers.
Amazon's third-party platform is one of the most valuable areas of its businesses, accounting for $307 billion of the company's $1.1 trillion enterprise value and comprising 58% of all merchandise sales. For comparison, its first-party platform is worth $93 billion.
But while these sellers are a crucial part of Amazon's business, Amazon is also likely a crucial part of their business too as for many, this might be the only way to sell their products to a wider audience. This means that Amazon has the power to raise fees without having to worry too much about a mass exodus from the platform.
Amazon has come under scrutiny for its business practices on its third-party platform - specifically for its role as both a platform for merchants and a seller as reports surfaced indicating it had been using sellers' data to create its own versions of best-selling items.
As a result, third-party sellers are gearing up to complain to the Department of Justice and Federal Trade Commission about why Amazon is competing against them too.
"I think a lot of sellers sense who they're up against and that Amazon's not their friend," Paul Rafelson, a tax law attorney at Francissen Rafelson Schick, LLP whose practice is focused on helping Amazon sellers, told Business Insider's Rachel Premack. "Amazon will use them when necessary and dispose of them when appropriate. There's no love there."