Overview

Amazon has warned sellers that invoice defect rates surged after the intense Q4 shopping period, and any account whose defect rate exceeds 5 % risks suspension. The marketplace is urging sellers to move to automated invoicing—either through Amazon’s free VAT Calculation Service (VCS) or an approved third‑party solution—to keep compliance solid as 2025 approaches.

Key Points

• Defect spike post‑Q4 — Invoice defect percentages rose sharply after Black Friday, Cyber Monday and the holiday gifting season.
• 5 % ceiling — Sellers whose invoice defect rate (IDR) climbs above 5 % may face account restrictions or full suspension.
• Automation recommendation — Amazon promotes its no‑cost VAT Calculation Service as the simplest way to eliminate most invoicing errors.
• Approved third‑party list — Only invoicing tools on Amazon’s approved provider list are guaranteed to transmit compliant invoices.
• Weekly health checks — Monitoring the Account Health dashboard at least once a week during peak periods can catch rising defect rates early.

How the VAT Calculation Service Works

1. Enable VCS in tax settings — A seller logs into Seller Central, navigates to the tax configuration page, and toggles the VAT Calculation Service to “active.” For example, a seller handling 1,200 European orders per month can activate VCS with a single click, eliminating manual entry.
2. Automatic tax rate assignment — Once active, VCS reads the buyer’s shipping address, determines the correct EU VAT rate (e.g., 20 % for Germany, 21 % for Spain), and applies it to each line item. A seller shipping a multi‑SKU order to France will see VCS calculate 20 % VAT on each SKU without any manual calculation.
3. Invoice generation and delivery — After the order ships, VCS creates a compliant VAT invoice in PDF format and pushes it to the buyer’s Amazon order page. The buyer receives the document instantly, satisfying the required delivery window. For instance, a seller fulfilling a same‑day shipment to Italy will have the invoice appear in the buyer’s order details within minutes.