What reports should marketplace sellers keep?

Keep gross sales reports, fee reports, refund reports, payment processor statements and a monthly VAT-threshold calculation.

Does the VAT threshold use profit?

No. The registration test is based on taxable turnover, not profit.

Do platform fees reduce VAT taxable turnover?

Q: Do platform fees reduce VAT taxable turnover?

Usually you should start from taxable sales, not the net payout after platform fees. Fees are normally costs, not a reduction in the sales figure for the VAT threshold test.

Last reviewed: 15 June 2026

Quick summary

Platform fees normally do not make VAT taxable turnover equal to the net payout.
VAT registration is tested against taxable turnover, not profit, margin, Stripe deposits or what Etsy/eBay/Amazon sends to your bank.
Keep monthly gross sales, refunds, fees, tax invoices and payout reports so an accountant can reconcile the threshold calculation.

Topic hub: Small business tax and VAT guides

Direct answer

Platform fees usually do not reduce the sales figure you check against the VAT registration threshold. GOV.UK says taxable turnover is the total value of everything you sell or supply that is not exempt. For a marketplace seller, that means you should normally start from the taxable sale to the customer, then show platform fees, payment fees, advertising costs and fulfilment fees separately as costs.

This is why a seller can feel "under the threshold" by looking at payouts while the gross taxable sales report is already much closer to the VAT line. The exact VAT treatment can still depend on what you sell, where customers are, whether sales are exempt, zero-rated or outside the scope, and whether marketplace VAT rules affect the transaction.

The money model platform sellers should use

Think of each order in layers. The first layer is the customer sale: product price, delivery charged to the customer and any taxable elements of the order. The second layer is adjustments such as refunds or cancelled orders. The third layer is platform and processor costs: Etsy transaction fees, eBay fees, Amazon referral fees, Shopify subscription costs, TikTok Shop fees, PayPal fees, Stripe fees and ad fees. The fourth layer is the net payout.

The VAT threshold question belongs mainly to the first layer, not the fourth. An accountant may still need the fee layer because it affects profit, VAT recovery after registration, software reconciliation and ecommerce bookkeeping. But the fee layer does not automatically shrink the sales layer for the registration threshold.

That distinction is a common competitor gap. Many guides tell ecommerce sellers to check turnover, but they do not show how to build the figure from platform dashboards. Accountancy Ally should push readers towards a report pack: gross sales export, refunds export, fee export, payout statement and monthly rolling total.

Examples where sellers get caught out

An Etsy seller sees £6,900 paid into the bank each month after fees and postage labels. Gross taxable sales might be £7,800, which changes the rolling 12-month view.
A Shopify seller receives Stripe deposits net of processing fees. The Stripe payout is not the same as Shopify order revenue for VAT threshold monitoring.
An eBay reseller has private-seller fee changes and buyer charges on the platform. They still need to understand their own taxable sales if they are trading.
An Amazon seller sees reserve balances, refunds, fulfilment charges and referral fees. Monthly payout summaries alone are not a clean VAT turnover report.
A TikTok Shop seller runs heavy promotions and samples. Discounts, returns and fees need separating so the monthly sales figure is not guessed from the bank account.

Records to gather before asking for help

Monthly gross sales exports from every platform.
Refund, cancellation and chargeback reports.
Platform fee invoices and payment processor fee reports.
Bank payouts and reserve movements.
Sales split by UK, overseas, B2B, B2C, exempt, zero-rated and standard-rated where relevant.
Stock, postage, ad spend and fulfilment costs so profit can be reconciled separately from VAT turnover.
A rolling 12-month spreadsheet showing the sales figure used each month.

When to speak to an accountant

Speak to an accountant if your rolling taxable sales are approaching £90,000, if you use more than one platform, if sales include overseas customers, if your products may be zero-rated or exempt, or if you cannot explain why platform payouts differ from sales reports. The conversation should be about evidence, not just "do I need VAT?"

Ask for a specific review of your VAT threshold calculation and platform reconciliation. That is narrower than a full bookkeeping package and can be a sensible first step before committing to monthly support.

Questions to ask an accountant

Which platform report should I use for gross taxable sales?
Do refunds reduce the turnover calculation in my records, and how should they be evidenced?
Do any of my products or customers change the VAT treatment?
How should platform fees be recorded after VAT registration?
Which software setup will reconcile sales, payouts and fees cleanly?

Common mistakes with fees and turnover

The most common mistake is treating every payout as if it is a sales report. A payout may already have fees, reserves, refunds, subscription charges, ad spend or postage labels deducted. That makes it useful for bank reconciliation but weak for VAT threshold monitoring. A second mistake is treating profit as the VAT test. Profit matters for Income Tax or Corporation Tax, but VAT registration starts with taxable turnover.

Another mistake is waiting for the annual accountant meeting. VAT is monitored month by month, so a marketplace seller needs a simple rolling tracker even if the tax return is months away. A final mistake is ignoring product type. Standard-rated, zero-rated, exempt and outside-the-scope sales are not all the same, so an accountant needs enough product and customer detail to check the right treatment.

What to write in your first accountant message

Keep the message short and evidence-led: "I sell through these platforms. My gross sales by month are attached, along with refunds, platform fees and bank payouts. I am trying to confirm whether platform fees reduce VAT taxable turnover and whether I am close to registration." That wording tells the accountant the exact judgement call and avoids a vague request for "VAT advice".

If you sell more than one product type, add a note explaining the categories. If you sell overseas or to business customers, add a simple split. The accountant can then decide whether the issue is a straightforward threshold calculation or a wider VAT treatment review.

Key takeaway

For VAT threshold monitoring, do not treat the payout as the answer. Start with taxable sales, then reconcile fees and costs separately so the accountant can see the real VAT position.

Official guidance checked on 15 June 2026

FAQs

Do Etsy or eBay fees reduce my VAT threshold figure?

Usually no. Fees are normally costs. The VAT threshold starts with taxable sales, not the amount paid out after fees.

Is VAT based on profit?

No. VAT registration is based on taxable turnover, not profit.

Should I use my bank deposits?

Bank deposits are useful for reconciliation, but they are not enough on their own because marketplace payouts may be net of fees, reserves and refunds.