Tax Tips: Everything You Need to Know About Sales Tax

outright

Story by outright

Published on Dec 06, 2010 in Seller Handbook

Photo by jjevensen

Etsy’s bookkeeping partner, Outright.com, is back on the blog with straightforward tips on simplifying your accounting and putting the focus back on the creative. (Note: This info may only apply to U.S. sellers.)

When archaeologists dug out the ancient tombs of Egypt, they found marvelous artifacts like mummies and finely wrought jewelry; they also uncovered paintings of — no joke — sales tax collectors. It turns out that sales taxes on commodities such as cooking oil have been around ever since there were governing bodies to collect them.

These days, 45 U.S. states and the District of Columbia assess sales tax. If you’re an Etsy seller and you live in one of the states that require sales tax collection, this article will explain the fundamentals for you. For those who live in Alaska, Delaware, Montana, New Hampshire or Oregon ­— lucky you, you get a pass!

When Do I Collect Sales Tax?

Online sellers with “nexus” (legalese for “a physical presence” such as a store, office or employee) in a state or district with sales tax laws are required to collect on items sold and delivered within their state. In other words, if you run your business out of Virginia and someone from Virginia orders an item from you, then you are required to charge them sales tax. Sales tax rates levied by U.S. states are generally between 5-7%.

Sadly, you can’t just look up your state’s sales tax rate and call it a day. Cities, counties, municipalities, parishes and other smaller units within states are also able to levy sales tax, and according to the National Retail Federation, 7,500 jurisdictions (not including states) impose some kind of sales tax. These can run another 1-2% of the price of an item.

Note that most states allow you to collect sales tax at your local rate, not the local rate of the buyer. This means that you do not have to look up the local sales tax for every in-state buyer who makes a purchase from your store. So if you live in San Francisco, but sell to someone in San Jose, San Diego or San Jacinto, you can still charge sales tax at your local rate.

Some states though, like Washington, require sellers to charge buyers the buyer’s local tax rate. This means collecting very accurate address information and then figuring out the total amount of tax due based on where your buyer lives.

Fortunately, Etsy’s new Checkout process gives sellers a one-time, simple way to calculate and set up their sales tax collection down to the zip code. Just go to Sales Tax under Your Etsy and enter the rates for each U.S. state or zip code, Canadian province, or country where you would like to charge sales tax. When a shopper from that area buys from you, sales tax will automatically be charged. Find step-by-step instructions on setting up your Etsy sales tax collection in the Help section.

I’ve Collected All This Sales Tax. Now What?

It is your responsibility as an Etsy shop owner to report and remit the sales tax you’ve collected to the appropriate taxing authority. And every state collects in a different way. For instance, in California, state sales taxes are collected by the State Board of Equalization, which also issues mandatory sellers permits (required for sellers who sell tangible goods, such as Etsy sellers). To find out who administers sales tax in your state — and what you need to do to stay legal – find your state guide at Outright.

A note of caution: some sellers play it safe and collect just a little bit extra when it comes to things like shipping. (Etsy’s Sales Tax settings allow you to choose whether to apply tax to shipping and handling.) Resist the urge to collect extra sales tax! According to state law, any extra sales tax you collect belongs to them, too. Don’t ask us why — it’s the law. You’re doing yourself and your buyers a favor when you figure out sales tax right down to the nearest penny, and not a penny more.

And when this all feels a little overwhelming, just remember the basics: charge the right amount and keep track. You are participating in a tradition that is as old as the pyramids!

More Articles on Taxes

Discuss: 146 comments

146 comments

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  • BlueIrisJewelry

    BlueIrisJewelry says:

    Very helpful--thank you!

    1 year ago

  • MyCreativeSideKG

    MyCreativeSideKG says:

    Good info! Thanks!!

    1 year ago

  • brooksbarrow

    brooksbarrow says:

    Good tips!

    1 year ago

  • sweetjane

    sweetjane says:

    Such a pain....thanks for the advice!

    1 year ago

  • PlumeandPetals

    PlumeandPetals says:

    Thanks for the info~!

    1 year ago

  • MireilleLagow

    MireilleLagow says:

    Great tips! Thanks!

    1 year ago

  • myvintagecrush

    myvintagecrush says:

    Love it! Thanks again, team Etsy!

    1 year ago

  • birdie1

    birdie1 says:

    Thanks! Etsy has makes it easy. Had one problem last week with a local buyer where sales tax should have been collected but wasn't. The buyer was sending item out of state as a gift - would that have anything to do with it?

    1 year ago

  • karenjcreations

    karenjcreations says:

    Good tips! Thanks:)

    1 year ago

  • halfpintsalvage

    halfpintsalvage says:

    Gonna get started on sales tax this morning. Thanks for the heads up!

    1 year ago

  • cieliblu

    cieliblu says:

    Thanks so much! What a huge help :)

    1 year ago

  • MerCurios

    MerCurios says:

    Great article. Unfortunately, NY State is not that simple. Here, sales tax is collected based on the persons zip code as there are many different rates within the state. The annoying factor is a small price to pay for doing business here. It gets easier & less intimidating as time goes by. Now, if only the sales tax due date was in line with the annual taxes - usually I'm scrambling at the last minute because I totally forget about it until about February.

    1 year ago

  • BethanyOgle

    BethanyOgle says:

    I'm really glad you wrote this article. When Etsy introduced the sales tax by zip code I thought I was doing something wrong. I didn't realize that some states charge the buyers tax rate. I have also shipped gifts out of state, and then later found out the buyer was local. I'd like to know the answer to Birdie1's question too.

    1 year ago

  • abelabodycare

    abelabodycare says:

    Helpful info. Thanks!

    1 year ago

  • patchesnthings

    patchesnthings says:

    Thank you so much for the information.

    1 year ago

  • DalkullanJewelry

    DalkullanJewelry says:

    Thanks for the help in dealing with collecting sales tax!

    1 year ago

  • MarKhed

    MarKhed says:

    taxes suck, but this makes them suck a little less. Thanks!

    1 year ago

  • ohbabydotcom

    ohbabydotcom says:

    Great tips!

    1 year ago

  • 8thStreetSoap

    8thStreetSoap says:

    Gah! Don't bother looking for a DC tax guide on Outright -- they don't include one. Disappointed.

    1 year ago

  • LuvinEveryMinute

    LuvinEveryMinute says:

    la la la la la (with my fingers in my ears) Smile. Thanks for the information.

    1 year ago

  • SimpleJoysPaperie

    SimpleJoysPaperie says:

    Thanks for the tax tips!

    1 year ago

  • HeyDiddleBaby

    HeyDiddleBaby says:

    Very helpful, thank you for the post! (and etsy tool)

    1 year ago

  • BeatificBijoux

    BeatificBijoux says:

    I always appreciate tax information. Reporting taxes is the most confusing aspect of the whole business to me.

    1 year ago

  • paramountvintage

    paramountvintage says:

    "fork it over" haha, so funny. thanks for this article!!! it is more than helpful!!!

    1 year ago

  • Marvidrio

    Marvidrio says:

    Thanks for posting this!! I can now let out a sigh of relief:)

    1 year ago

  • Asianexpressions

    Asianexpressions says:

    Thank you!

    1 year ago

  • dayslonggone

    dayslonggone says:

    Thanks for this information!

    1 year ago

  • Prittyfy

    Prittyfy says:

    Informative. Thanks a bunch.

    1 year ago

  • happymaxdesigns

    happymaxdesigns says:

    Thank you!!!

    1 year ago

  • CositasSeriasVintage

    CositasSeriasVintage says:

    Thank you!

    1 year ago

  • cjrosejewelry

    cjrosejewelry says:

    I can always use helpful tips with taxes! Thanks!

    1 year ago

  • blueskyclouds

    blueskyclouds says:

    Excellent!

    1 year ago

  • engelpottery

    engelpottery says:

    This has been very confusing for me. Thank you for the help!

    1 year ago

  • dessertfirstdesigns

    dessertfirstdesigns says:

    thanks for the info!

    1 year ago

  • livelovemaria

    livelovemaria says:

    The link "states that require sales tax" leads to an overview on the outright website, but from there when clicking on the "Wisconsin" link it leads to the Illinois link. I looked a bit at the address path and figured out it should link to this address: http://education.outright.com/wisconsin/wisconsin-business-taxes-and-license-permit-requirements/

    1 year ago

  • oguerrero

    oguerrero says:

    Thanks for the tip :)

    1 year ago

  • lauraprill

    lauraprill says:

    thanks for this post :)

    1 year ago

  • weebit

    weebit says:

    oh goodness, this is awesome! Thanks for providing this often overwhelming information in such an understandable format.

    1 year ago

  • EverybodyElse

    EverybodyElse says:

    Helpful stuff

    1 year ago

  • ThreeBirdsJewelry

    ThreeBirdsJewelry says:

    I was just starting to dread tax season since this is my first year selling...thanks for the helpful article!

    1 year ago

  • nancynelsonjewelry

    nancynelsonjewelry says:

    thanks for the tips:)

    1 year ago

  • blueridgewoodworking

    blueridgewoodworking says:

    thank you...I hope I don't get "killed"

    1 year ago

  • LittleMunchkinShop

    LittleMunchkinShop says:

    Lots of great info and tips!

    1 year ago

  • doveandflower

    doveandflower says:

    Very helpful, will definitely file this away till tax time. Thank you;-)

    1 year ago

  • byrachelrose

    byrachelrose says:

    Thank you so much for the advice. My only question is how can I set 2 rates for my state? I sell clothing and in my jurisdiction items $110 or less are exempt from city tax so I only have to charge state tax. I have some items over $110 and some under...what can I do?

    1 year ago

  • TheLittleRagamuffin

    TheLittleRagamuffin says:

    It is unfortunate that as of now NY State sellers can't set up the correct tax rates on Etsy as our tax rates vary by county and not zip code (many zip codes have more than one county within them). So the new sales tax setting based on zip codes won't work for us :( Etsy seller GoTo has some great info about NY Sales Tax posted on her blog: http://www.gotogreatpanes.com/blog/2008/01/17/new-york-sales-tax/ It's incredibly helpful!

    1 year ago

  • ballandchain

    ballandchain says:

    Yes, NY state taxes are by reporting code, can we please get this option? As we cannot use the zip code method. Pretty please? :)

    1 year ago

  • DevineCollectible

    DevineCollectible says:

    Yes, need to pay your tax! Peace out, DevineCollectible

    1 year ago

  • backbaybeads

    backbaybeads says:

    Great read and super helpful...Thank You!!!!

    1 year ago

  • jaipuronline

    jaipuronline says:

    I can always use helpful tips Thank's...

    1 year ago

  • tiemee

    tiemee says:

    Thank you for the reminder--I opt to do mine monthly because it is so fun!

    1 year ago

  • NaturallyARKtistic

    NaturallyARKtistic says:

    Thanks for the information! Very helpful!

    1 year ago

  • NaturallyARKtistic

    NaturallyARKtistic says:

    Thank you for the information! Very helpful!

    1 year ago

  • BellaPuzzlesToo

    BellaPuzzlesToo says:

    So glad I live in Oregon. :)

    1 year ago

  • redemptionart

    redemptionart says:

    Thank you...this helps

    1 year ago

  • Barbiola

    Barbiola says:

    Your insight into the actual business of running a shop is truly appreciated. Any further blogs on the nitty-gritty, nuts-and-bolts of financial and regulatory aspects of enterprise operation are more than welcomed!

    1 year ago

  • reiddamnit

    reiddamnit says:

    thanks for the information and links - so helpful!

    1 year ago

  • bumblebooHandmades

    bumblebooHandmades says:

    Thanks for the information! :)

    1 year ago

  • bumblebooHandmades

    bumblebooHandmades says:

    Thanks so much for the info!!

    1 year ago

  • ikabags

    ikabags says:

    Merci :)

    1 year ago

  • outwardbound

    outwardbound says:

    I have my shop set to collect sales for Georgia, but it never shows that it does.

    1 year ago

  • EponaJewels

    EponaJewels says:

    Thank you for the information!

    1 year ago

  • SimplyMaco

    SimplyMaco says:

    But no options to mark which items are taxable? In Pennsylvania, clothing and food are not taxable, but accessories are.

    1 year ago

  • Carolineart

    Carolineart says:

    Very useful. Thanks!

    1 year ago

  • brookeelissa

    brookeelissa says:

    Ah, taxes! My least favorite part of being an "artist". ha, ha! Thank you so much for the sales tax function! This came out the week I set up shop. Good timing! Now, to get to the bookkeeping . . . If only you had a function for that!

    1 year ago

  • e5jewel

    e5jewel says:

    I just made a purchase from an Etsy shop in my local area (GA) and was charged sales tax. I was wondering about that-thank you for clearing that up!

    1 year ago

  • BabyJoeyStore

    BabyJoeyStore says:

    I was just about to feel overwhelmed in figuring this out. Thank you so much.

    1 year ago

  • LilahBelleVintage
  • Maddivadesigns

    Maddivadesigns says:

    Lots of great info. Thank you!

    1 year ago

  • Flipabill

    Flipabill says:

    Thanks for the info, but speaking as a California seller, there are way too many zipcodes for us to enter on the etsy site. I do wish you had a solution for this. For now, customers will have to accept my higher sales tax rate or tell me where they want their purchase mailed to in advance, so I can set up a special zipcode connected sales tax for them.

    1 year ago

  • RetroFirsts

    RetroFirsts says:

    This came at the perfect time. Thanks!

    1 year ago

  • pinkhouse

    pinkhouse says:

    Thank you!

    1 year ago

  • CraftedRoots

    CraftedRoots says:

    Thanks so much!! A lot of good information all in one place! Who could ask for more? :)

    1 year ago

  • BooksInspireMe

    BooksInspireMe says:

    Thanks!

    1 year ago

  • InkspotWorkshop

    InkspotWorkshop says:

    But PayPal is already setup to charge my customers sales tax, why do I need to have Etsy collect it too?

    1 year ago

  • allisonwilsonphotos

    allisonwilsonphotos says:

    Thank you for the information!

    1 year ago

  • wass1

    wass1 says:

    TY for the info i didn't even know I had to charge sales tax!! I agree with Filabill living in California we have way to many zip codes.This is going to take some work. That is if I ever sale anything. It's only been a week though.

    1 year ago

  • Lilywinkel

    Lilywinkel says:

    I think I will move to Montana, Delaware, Oregon... I think I finally have figured out how Colorado tax works, now I just need to do some zip code research to find out what zips are in the same tax district as me. Thanks for this article!

    1 year ago

  • Katexpressions

    Katexpressions says:

    Thanks so much for providing information on each state and what they require. I really appreciate help on the business/legal side of things...

    1 year ago

  • foxpots

    foxpots says:

    Sellers should note that tax jurisdictions don't always line up with zip codes. For example, I live in a tax jurisdiction with a 6.5% sales tax rate. However, my location shares a zip code with another tax jurisdiction that has a 7% tax rate. I find it extremely irksome that most online retailers just go ahead and collect the higher rate. I end up paying more than I should, and my tax jurisdiction doesn't get their fair share of tax revenue. This is a very complex matter. Sellers need to be aware of their local tax laws and be careful not to oversimplify.

    1 year ago

  • PetrinaCaseStudio

    PetrinaCaseStudio says:

    Have been charging tax since I opened my shop. The biggest problem with New York State tax is they say I must add tax to shipping. I cannot get the Etsy button to do that. Etsy does not seem to charge tax on shipping. Tax form: TSB-M-92 (2)S

    1 year ago

  • ASHWoodshops

    ASHWoodshops says:

    Thanks for the information. It was very helpful. Blessings,

    1 year ago

  • VintageHaven

    VintageHaven says:

    I would like to see Etsy find a way to tax only the items I sell that are taxable (maybe check a box during the listing). I live in Mass and it is not an all or nothing situation. Some vintage items are taxed while others are not. No easy fix besides send a separate paypal invoice for taxes only for items that should be taxed when Mass buyers don't convo first. Any ideas from other sellers-convo me.

    1 year ago

  • WhisperingOak

    WhisperingOak says:

    Thank you Etsy for providing the information and great tips

    1 year ago

  • jezebelle88

    jezebelle88 says:

    I'm sooo lost. I don't understand why I need to add tax? Can I just sell an item for $10 bucks and that be it? Like a yard sale?? Someone help! :[

    1 year ago

  • HappyFaceArt

    HappyFaceArt says:

    It is good to know there is help when I need it. Thanks for. The information.

    1 year ago

  • LumiereEtAlouette

    LumiereEtAlouette says:

    I looked at that website that's supposed to tell us what the tax rates are, and it's organized all wrong. I clicked TN and it showed me Texas. Then I tried to look at the permits and business license requirements, and instead of TN, it showed me Virginia. Not to mention, I don't understand how I am supposed to know which places I should be collecting tax from, or what I'm supposed to do with it after it's been collected. If anyone wants to help me out, I would really appreciate it! I'm so lost! :(

    1 year ago

  • northernskyquilts

    northernskyquilts says:

    Thank you Etsy for walking us through the sales tax issue. I really appreciate all you do for us shop owners!!!!

    1 year ago

  • Lutrick

    Lutrick says:

    Needs to be fixed to help with NY and WA where it is charged weirdly. I'm in Wa and I have to charge where it is going, not where I am. Very annoying. If my website shopping cart can do this, why not Etsy?

    1 year ago

  • FreshRetroGallery

    FreshRetroGallery says:

    I like that you can download a csv file of "sold orders" with etsy, to help keep track of things, too.

    1 year ago

  • EfiaFair

    EfiaFair says:

    Thank you, thank you, thank you for this article. I feel so alone when trying to figure out complicated CA taxes ... great resource here. :)

    1 year ago

  • Angelof2

    Angelof2 says:

    We reside in state with over 27+ ever changing tax rates.

    1 year ago

  • gracefuldesignscards

    gracefuldesignscards says:

    Thanks for the reminder--I just went to set my sales tax for Virginia!

    1 year ago

  • nenafashions

    nenafashions says:

    Thanks for the info. Gotta keep Uncle Sam happy.

    1 year ago

  • TheScrapBasket

    TheScrapBasket says:

    Thanks for the info. It is very overwhelming, but all good stuff to know. Thanks for doing all the leg work!

    1 year ago

  • anhartetsy

    anhartetsy says:

    Sales Tax... its EVERYWHERE. I'm glad I now have a better understanding of how to collection and from whom. Thank you

    1 year ago

  • LillyPinkPaperie

    LillyPinkPaperie says:

    http://www.ehow.com/how_6591157_charge-tax-internet-sales.html http://www.allbusiness.com/sales/internet-e-commerce/2652-1.html Check out these articles. I appreciate Etsy's info on this... However, I think it's important to gather information from other resources as well. These web pages also have good links within.

    1 year ago

  • evdesign

    evdesign says:

    Thank you. That is some helpful advise.

    1 year ago

  • EnglishTraditions

    EnglishTraditions says:

    I've never seen Sales Tax explained so well in such simple terms - I teach business and our local CPAs refuse to comment on sales tax issues on the internet. GREAT article!

    1 year ago

  • mbracestudios

    mbracestudios says:

    You have saved me!

    1 year ago

  • penyadesignshop2

    penyadesignshop2 says:

    thank you for this!! because i was doing some crazy research and this article just made me feel like i was on the right track!!

    1 year ago

  • NotYoMommasHandbag

    NotYoMommasHandbag says:

    Very clear! now I understand....thank you....smiles

    1 year ago

  • jaipuronline

    jaipuronline says:

    I love this article....

    1 year ago

  • GemdropsoftheFalls

    GemdropsoftheFalls says:

    Tricky, but ya gotta do it. Thanks for the info.

    1 year ago

  • artzygirl7

    artzygirl7 says:

    Thanks so much. I live in New York and just found out about Amazon. No wonder I haven't heard back from them on their affiliate program. Much needed information. Thank you. I will get set up with Outright, as soon as I get my Etsy shop up and running. Joanne Merrick Johnson www.sculpturedlife.com

    1 year ago

  • zrhardy

    zrhardy says:

    So do you only have to collect taxes if you have a real shop outside of Etsy or if Etsy is your sole source of income? I am still a little confused and worried that I am doing the wrong thing . . .

    1 year ago

  • NenasArtandDesigns

    NenasArtandDesigns says:

    Thanks, I've added this one to my "favorites".

    1 year ago

  • blufaerie

    blufaerie says:

    Thank goodness... This was a very helpful article!

    1 year ago

  • Seaweaver

    Seaweaver says:

    Thank you so much for this article!

    1 year ago

  • VeCeramics

    VeCeramics says:

    Thanks!

    1 year ago

  • texasnan

    texasnan says:

    Very helpful information. Thanks so much!

    1 year ago

  • JKLEncaustics

    JKLEncaustics says:

    good to know

    1 year ago

  • AlphaDogPhoto

    AlphaDogPhoto says:

    Thanks for this article. I beieve I have been doing everything correctly, but am off to read more to make sure. "If you take a walk I'll tax your feet; if you try to sit I'll tax your seat..." It's that time of the year.

    1 year ago

  • dazzleme12

    dazzleme12 says:

    Very helpful. I signed up for Outright.. Etsy makes it easy to set up on line selling.

    1 year ago

  • EssenceofTranquility

    EssenceofTranquility says:

    Thank you for your Tips love and light Caz x

    1 year ago

  • blankiesandtreasures

    blankiesandtreasures says:

    thanks for the info...just now setting up my etsy account&need all the help I can get!

    1 year ago

  • Gabsie

    Gabsie says:

    I'm wondering how these things are in Europe, does anyone know?

    1 year ago

  • lettersandthread

    lettersandthread says:

    It says in the article that if you have a nexus, a physical store, then you need to charge sales tax when someone from your state orders from you. If I do NOT have a physical store, just an etsy site, am I required to charge sales tax or not? And if I do need to charge it, do I charge everyone or just those from my state? This article leads me to believe I don't need to charge any tax at all...but that sounds too easy. Can anyone clear this up? Thank you.

    1 year ago

  • SterlingEchoes

    SterlingEchoes says:

    great article full of much needed information - thank you so much!! I have been wondering how it will affect me living in Oregon and this was fantastic.

    1 year ago

  • OliveandOwl

    OliveandOwl says:

    Amazing that something so simple is actually so complicated. If only we could just barter!

    1 year ago

  • whispersofnature

    whispersofnature says:

    There are times when the business aspects of creating can put a bit of a dark cloud on my energy. Etsy's support, such as this posting, are a breath of fresh air. With much appreciation ~ Whispers of Nature

    1 year ago

  • chini

    chini says:

    Thanks for the GREAT support! ~Chini

    1 year ago

  • puppydog35

    puppydog35 says:

    Thanks I needed that infomation

    1 year ago

  • EmelineW

    EmelineW says:

    This was exactly what I needed to read! Thanks! This whole shop thing is a bit overwhelming...

    1 year ago

  • JanieMarieDesigns

    JanieMarieDesigns says:

    This is great to know since I have not sold anything yet I can start fresh.

    1 year ago

  • PrairiePrimitives

    PrairiePrimitives says:

    I've been selling my stuff for awhile and though I'm not an account nor attorney, I think I have a pretty good grasp of "tax stuff," both sales tax and income tax. I'm going to start at the bottom and work my way up to see if I can answer any questions. 99% of this comment is about sales tax, however there is a bit about federal income tax at the very bottom which applies to ALL U.S. businesses. (It looks like I got a little wordy because Etsy is telling me that I haven't typed anything yet, so I'm going to break this up into a couple of comments!) @lettersandthread, although the article used the word "nexus," the general idea is that (for states that have sales tax), you need to collect sales tax when you make a sale in a state where you have a physical presence. You live in your state, so you have a physical presence there so, if your state has a sales tax, you should be collecting it. If you go to the next state over (or across the country) to do a craft fair, you have a physical presence there for the duration of the craft fair and so you should be collecting sales tax on sales made at the craft fair. For sales where you are physically outside of your home state (such as an out-of-state craft fair), you would collect the tax based on the rate at the location where you are making the sale. Of course this also means you should have a seller's permit, tax license, or whatever it may be called for that location; most states offer temporary seller's permits to non-residents who only plan to sell in the state a few days each year. And you only collect sales tax for items shipped to a state where you have the authority to do so (i.e., where you hold a sales tax license, seller's permit, etc.). If one lives on or near a state border and does business on a regular basis in two (or more!) states, they should have sales tax permits in each state. In this case, you would collect sales tax on items you sell within each state (such as at craft fairs) as well as items which you sell online which are shipped to either (or any) of those states.

    1 year ago

  • PrairiePrimitives

    PrairiePrimitives says:

    @zrhardy, you should be collecting sales tax if you sell your handmade wares through any venue, whether that's online or at craft fairs or in a brick & mortar store. You'll need to have a seller's permit, sales tax license, or whatever your state may call it (they all have their own name for the document!); this is what entitles you to collect (and remit!) sales tax. @LumiereEtAlouette, see my above comments to see where and when you should be collecting sales tax. After it's collected, you remit it (turn it in) to the state where it was collected. If you do out-of-state craft fairs, as I mentioned above, you'll be turning in part of the tax to another state, so keep that in mind! I'm assuming that the Nashville you live in is Tennessee (there are Nashville's in other states too!). Here's more sales tax info specific to Tennessee: http://tn.gov/revenue/tntaxes/salesanduse.htm ... my experience (in Indiana and California) has been that the state will send you a sales tax return, however many states have done away with paper returns and are doing all of their sales tax collecting online. For small businesses that don't have a ton of sales, you will probably file your state sales tax annually. If you're a larger business (making hundreds of sales per month) or have a brick & mortar store, you may be required to file quarterly or even monthly. @jezebelle88, well, you can ... but you're not supposed to be doing it that way. As long as you're trying to make a profit (whether or not you do), you're considered a business ... and businesses have to collect sales tax. That's just the way it's done in the good ol' U.S. of A. @VintageHaven - SimplyMaco - RachelRose, does your state allow you to include sales tax in the selling price of the item? When I lived in Indiana (15+ years ago), that was forbidden however here in California, it seems to be acceptable. If you can include the sales tax on the items where you need to collect it, then just skip the Etsy sales tax thingy altogether! @wass1, I'm also in California and if we are supposed to be collecting sales tax based on zip code, I wasn't aware of it. So check with the BOE before you spend any time trying to set things up like that. Some states handle sales tax based on zip code, some by county or city (which is how CA seems to do it), and so on. @InkspotWorkshop, you don't. You shouldn't. That would be double taxation. As long as you're collecting sales tax one place or the other, that's all you need to do. Just be sure you're only collecting it for where you should be (states where you have a physical presence). @Flipabill, California sales tax isn't set up by zip code. It's by county (and occasionally city). Check the BOE web site for more info. A couple years ago, I blogged about setting up a small business in California; it's been a very popular article! Here's the link: http://prairieprimitivesfolkart.blogspot.com/2009/01/taxes-permits-licenses-for-new.html Now ... as for Federal Income Tax ... oh boy, that's a whole 'nother thing, and one that many people don't think about until sometime in April! However, as a business owner, you need to think about it prior to Dec. 31st because if you're showing a profit (especially a BIG profit), you may want to take steps to reduce that profit just a bit so you won't owe quite so much income tax to the feds. I got a little trapped by this situation back in 1994 when I had a VERRRRY good year (did a TON of wholesale that year). Early in December, I realized that I'd be showing a very healthy profit so I went out and bought a computer, printer, and software. Back in those days (the dark ages!), that cost me about $3,000 and even after writing all of that off as a business expense, I **still** had to pay Uncle Sam an additional $800, and another couple hundred dollars to the State. OUCH. Soooo ... today is 12/31, you've got another 12 to 14 hours to figure out if you're showing a profit that's going to be painful on April 15th. Happy New Year!

    1 year ago

  • krugsecologic

    krugsecologic says:

    I love my accountant - I don't understand any of it, so he handles it all :-) THANKFULLY !

    1 year ago

  • JKLEncaustics

    JKLEncaustics says:

    good to know!

    1 year ago

  • DEBBIEMCOLUMBIA

    DEBBIEMCOLUMBIA says:

    great info!!

    1 year ago

  • CountingSunsets

    CountingSunsets says:

    ahh, thanks for these links, i am new to selling so needed the info.!

    1 year ago

  • gaelgallery

    gaelgallery says:

    ok so how do i find out if my state wants me to only collect tax on buyers from my state only or all buyers?

    1 year ago

  • ArtCycling

    ArtCycling says:

    @gaelgallery I just read in an article that you collect sales tax on items that are shipped to a state where you live. My question is, if I'm in California and my friend who is going to sell things with me is in Indiana. All the money transactions are going through me...so does that mean I have to file her state sales taxes as well?

    1 year ago

  • GotMilkGlassAndMore

    GotMilkGlassAndMore says:

    Learning more every day. Thanks!

    1 year ago

  • BluKatDesign

    BluKatDesign says:

    How do I find all of the different tax rates; I can't even find a list of tall of the zip codes in WA state?

    1 year ago

  • BluKatDesign

    BluKatDesign says:

    How do I find all of the different tax rates; I can't even find a list of tall of the zip codes in WA state?

    1 year ago

  • PeterDurand

    PeterDurand says:

    I live in Washington state and pay my taxes online and have called the Department of Revenue a couple of times with questions. I was pleasantly surprised at how friendly and helpful they were. Here is a link to the information you need, http://dor.wa.gov/content/findtaxesandrates/salesandusetaxrates/lookupataxrate/ , Don't be shy about giving them a call.

    1 year ago

  • shopmiko

    shopmiko says:

    thank you for the helpful info!

    1 year ago

  • NicolettesJewelry

    NicolettesJewelry says:

    HI! is there somewhere in my shop stats or wherever that has a running total of the sales tax I have collected in 2011? As opposed to adding it up manually, one sale at a time... Thanks!

    122 days ago

  • idoloveyou

    idoloveyou says:

    Thanks for the info! You made especially easy because I'm based in Caliornia! I didn't realize you have to enter the rate for every state- geeeesh :/

    109 days ago

  • skcumberland77

    skcumberland77 says:

    So wait, if I am just making jewelry from my home (nothing big, everything is under $30) with no distinct office, store, or employee (nexus) am I required to file taxes as a business or just add it as extra income on my regular taxes? I will only have about 20 pieces total in my Etsy account.

    108 days ago

  • skcumberland77

    skcumberland77 says:

    Yeah I'm at a loss on dealing with Sales tax in WA... I wish Etsy's system would automatically assess the tax based on buyer. Now someone mentioned PayPal automatically adds the tax? Is that correct??

    108 days ago

  • skcumberland77

    skcumberland77 says:

    I am even more confused regarding license etc in WA...arrggghhh... I definitely make under 12k a year at this so do I have to have a license & collect taxes or what??

    108 days ago

  • AcidTongued

    AcidTongued from AcidTongued says:

    So to clarify, as long as I don't have a brick and mortar store or an employee I do not need to collect sales tax? I am in NJ if that helps. Thank you.

    71 days ago

  • AuriesDesigns

    AuriesDesigns from AuriesDesigns says:

    Just the info I was looking for. Thank you

    45 days ago

  • MagellansBelly

    Carol from MagellansBelly says:

    Thanks for this post!

    21 days ago