Seller Handbook

Advice and inspiration for successfully running your Etsy shop

How New Laws Impact State Sales Tax Collection on Etsy

Etsy collects state sales tax on some orders as a result of new laws. Learn more and join us in advocating for a simpler federal solution.

By Michael Mincieli Jul 26, 2018
Photo by Recneps Design

Over the past few months, some states in the United States have introduced new laws that affect online marketplaces like Etsy. As a result, we’ve made some changes to how sales tax is handled on Etsy. We want you to know that we have your back, and we’re hoping to make this transition as seamless as possible. We’re working with states to simplify this process for Etsy sellers as these states implement their new sales tax rules.

We’ve heard your feedback that these changes have been confusing, so we wanted to explain how these new laws will affect how we handle sales tax collection on Etsy, what is expected from you, and what we’re doing to advocate for laws that make it easier for you to run your creative business. Check back for updates as states pass new legislation.

When we collect and remit state sales tax for you

We are currently calculating, collecting, and remitting state sales tax on all orders shipped to addresses in Pennsylvania and Washington state. In response to new laws passed in these states, we started collecting and remitting state sales tax on orders shipped to Washington state on January 1, 2018 and for orders shipped to Pennsylvania on April 1, 2018.

We’ll also start collecting and remitting state sales tax on orders shipped to Oklahoma on August 1, 2018. We expect more states will attempt to pass similar laws or regulatory changes in the future.

We’ll let you know when anything changes, and if and when we start collecting states sales tax on orders shipped to more states.

Etsy calculates the state sales tax rate (they can vary from location to location, and item to item) for the shipping address, charges the buyer, and sends the tax owed to the state. For orders placed through standalone PayPal, the sales tax collected is sent to you as a part of the payment. Then, Etsy will add the sales tax amount to your Etsy bill so that we can remit the tax to the state. If you’ve made sales to Pennsylvania or Washington state since these changes went into effect, we’ve got it covered—Etsy has collected and remitted any sales tax owed. If you are required to file a sales tax return in these states, you do not need to report sales tax on Etsy sales; all you need to do is state that the sales were made through Etsy.

In addition to states where Etsy collects and remits state sales tax on your behalf, if you’re a seller in the United States you may still be responsible for collecting and remitting state sales tax to the state where your business has a physical presence, or where you make sales above a certain threshold, which vary by state.

You can use Etsy’s sales tax tool to set sales tax rates for your shop. Learn how to set state sales tax rates. If you’re unsure what your responsibilities may be, we encourage you to consult an accountant or other experts in your area.

Why states are changing their laws

States in the US are hoping to bring in more revenue through new taxes on their residents’ online purchases. Some have passed legislation that require online marketplaces like ours to either calculate, collect, and remit taxes on purchases made within their state, or notify purchasers by mail of their tax obligation and report information about purchasers to the State’s Department of Revenue.

These laws continue to be introduced in various states, creating a patchwork of requirements for us and our buyers and sellers. Because each state has their own set of rules and requirements, Etsy must make a determination about how to proceed on a case-by-case basis.

In Washington state and Pennsylvania, we were required to begin collecting and remitting state sales tax while the states simultaneously implemented these new rules. Our experience in these states so far has shown us how hard it is to properly classify the 50 million handmade, craft, and vintage goods available on our marketplace into taxable item categories. For example, sales of yarn in Pennsylvania are subject to tax, but not if the yarn is for use in clothing. Washington exempts candy from tax, but not if that candy needs to be refrigerated.

We will continue to fine tune the process of matching your listings to the product codes in each tax jurisdiction. In the meantime, if you believe state sales tax has been applied in error, please reach out to us.

We’ve heard your concerns and are actively working with policy makers in Washington state and the Department of Revenue in Pennsylvania to express those concerns.

How you can join our advocacy efforts

We know that this patchwork approach to state sales tax can be frustrating for buyers, sellers, and even for the states that are implementing the new rules. That’s why we continue to advocate for a federal solution that harmonizes and simplifies sales tax for online purchases. Join us by signing this petition to Congress.

You can help our advocacy efforts by sharing your experiences about how these laws are impacting your business. Share your story by filling out this form, and we may use your comments for future advocacy efforts.


Michael Mincieli

Mike is a senior manager on Etsy's Tax team. He currently resides in Brooklyn, is a total history nerd, and is not the least bit scared of taxes.

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