It almost sounds like the beginning of a bad joke: “Two clueless people meet…” – but in reality, this is often the unfortunate situation when tax advisors and auditors at the tax office are faced with the tax returns of marketplace sellers. Things can get especially dire when cross-border revenues are involved. When in doubt, both sides agree on a questionable course of action – to the detriment of the seller. In the worst case, the seller ends up paying double taxes, gets suspended from Amazon, or even faces tax evasion charges. This exact scenario was documented by Taxdoo here. We asked Roger Grothmann in an interview what makes a good tax advisor for marketplace sellers:
Interview: What Makes a Good Tax Advisor for Marketplace Sellers?
Why is it so difficult to find tax advisors with expertise in the marketplace business? And what should sellers look for when choosing one? Roger is the founder of Hamburg-based tax technology company Taxdoo. He knows the challenges all too well from his ten years as an auditor and tax officer at the Federal Central Tax Office in Germany.
“OSS is nothing more than a mailbox – you still have to deal directly with foreign tax offices, in their language and under their laws.”
Marketplace Universe: Many online sellers say it’s extremely difficult to find a tax advisor who truly understands e-commerce. How well is the German tax advisory industry currently prepared for cross-border business models – especially when it comes to VAT and platform-based selling?
Roger: In Germany, we have around 50,000 tax firms. Fewer than 1 percent of them currently specialize in e-commerce clients. Meanwhile, there are about 40,000 to 50,000 sellers who sell internationally from Germany. When it comes to VAT and platform sales, they often can’t find a qualified tax advisor. But even those who sell only nationally face similar challenges, as tax advisors often also handle their bookkeeping.
How about the tax authorities? Are there auditors who actually understand e-commerce tax law – such as OSS or marketplace models?
Roger: At tax offices, there are usually auditors specialized by industry. But that’s where the problem begins: from the perspective of the tax authorities, e-commerce isn’t considered its own industry. I often hear that auditors educate themselves on e-commerce in their free time, because official training offerings are lacking. That’s a risk for every seller – if the auditor doesn’t understand the subject, they end up fumbling in the dark.
Tax Advisory in other countries
Are there countries in Europe where tax advisors and authorities are significantly more proficient in e-commerce, or are the challenges similar everywhere?
Roger: In other countries, the profession of tax advisor is not as heavily regulated as it is in Germany. While this regulation has some advantages, such as high quality standards, it also has downsides, such as a lack of pressure to transform and little development in digital business models such as e-commerce, as well as high barriers to entry. Since these barriers to entry do not exist in most European countries, there are significantly more tax experts with a focus on e-commerce there. The picture is mixed when it comes to the authorities. Countries that are highly centralized, unlike Germany, have significantly greater e-commerce expertise in their top authorities. As a result, Italy, for example, is much more committed to combating tax fraud on platforms than Germany is or can be.
Is e-commerce starting to be taken more seriously in tax advisory, or does it remain a neglected niche topic for most firms?
Roger: It’s still a niche topic. The issue starts during education and training. The handling of the large volumes of data even small e-commerce companies generate isn’t taught. Supporting e-commerce clients requires investments in processes, tools, and employee training. This isn’t something the average tax firm is used to, since most other industries generate profits for them from day one. So there’s little incentive to specialize in e-commerce more broadly.
Common mistakes in taxes
What common mistakes do online sellers make when it comes to VAT, distance selling thresholds, and the OSS system?
Roger: The core problem is that most sellers – and even tax advisors – don’t understand that OSS is nothing more than a mailbox. In the end, you still have to deal directly with foreign tax authorities for every penalty fee or follow-up – in the local language and according to local laws. Sellers also often forget that missing deadlines or submitting zero returns are more than just annoying formalities. Carelessness here can lead to exclusion from OSS – something we see regularly.
Who is liable if the tax advisor makes mistakes – for example, due to a lack of understanding of e-commerce?
Roger: In principle, the tax advisor is liable for mistakes they are responsible for. However, the division of responsibilities between the advisor and the seller is often not clearly defined in advance – for instance, who checks whether monthly figures or revenues are correct. As a result, the seller often ends up bearing the consequences.
How to find a good tax advisor
How can sellers identify whether a tax advisor is suitable for an e-commerce business? What should they ask them?
Roger: The first question I would ask is: “How many e-commerce clients do you currently serve, and what specific setups do you specialize in?” If the answer is satisfactory – for example, more than 10 clients and specific setups – I’d follow up by asking how the onboarding process works. E-commerce mandates without proper onboarding are always doomed to fail.
What needs to change so that online sellers finally have widespread access to tax professionals with real e-commerce know-how?
Roger: That’s the question currently occupying me the most. The good e-commerce tax firms are overwhelmed with demand and have waitlists. Smaller sellers often have to rely on generalist firms that only handle e-commerce on the side. I believe the required know-how on VAT, platforms, and e-commerce accounting – along with the necessary processes – must be centralized on digital platforms, and from there made accessible to tax firms and, in turn, all sellers. That’s exactly what we’re working on right now with full commitment.
Roger, thanks a lot for your time!
Want to know exactly where the pitfalls lie in your business? Then look forward to the next episode of our podcast “Let’s talk Marketplace”. Roger will be sharing some practical tips and revealing some secrets from his time as a tax auditor.