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Seller Handbook

Marketplace Sales Tax: Where Etsy Collects and Remits State Sales Tax

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

By Margo Gorski Jul 1, 2020
Photo by Recneps Design

Some states in the United States have introduced laws that affect online marketplaces such as 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.

These state sales tax laws are specific to marketplaces such as Etsy. You may have also heard about some states implementing additional sales tax laws as a result of the United States Supreme Court’s ruling in South Dakota v. Wayfair Inc. This ruling made it possible for states to require a seller to collect and remit sales tax on sales made into the state, if the seller reaches a certain revenue and/or transaction threshold in that state. These rules, known as internet sales tax laws, affect anyone who sells online, regardless of the platform that they’re using. Learn more in Understanding Internet Sales Tax Laws.

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 the following states. In response to new laws passed in these states, we started or will start collecting and remitting state sales tax on orders shipped to these states on the dates listed below.

Started collecting in 2018

State Date
Washington January 1, 2018
Pennsylvania April 1, 2018
Oklahoma August 1, 2018
Minnesota October 1, 2018

Started collecting in 2019

State Date State Date
Iowa February 1, 2019 Wyoming July 1, 2019
Connecticut February 1, 2019 Vermont July 1, 2019
South Carolina February 1, 2019 Indiana July 1, 2019
South Dakota March 1, 2019 Ohio September 1, 2019
New Jersey April 1, 2019 Arizona October 1, 2019
District of Columbia April 1, 2019 California October 1, 2019
New York June 1, 2019 Maine October 1, 2019
Idaho June 1, 2019 Massachusetts October 1, 2019
Nebraska June 1, 2019 North Dakota October 1, 2019
Alabama July 1, 2019 Texas October 1, 2019
Arkansas July 1, 2019 Utah October 1, 2019
Kentucky July 1, 2019 Wisconsin October 1, 2019
New Mexico July 1, 2019 Colorado October 1, 2019
Rhode Island July 1, 2019 Maryland October 1, 2019
Virginia July 1, 2019 Nevada October 1, 2019
West Virginia July 1, 2019

Started collecting in 2020

State Date
Hawaii January 1, 2020
Illinois January 1, 2020
Michigan January 1, 2020
North Carolina February 1, 2020
Georgia April 1, 2020
Louisiana July 1, 2020
Mississippi July 1, 2020

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 these states 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.

If you have a physical presence in a state where Etsy collects and remits state sales tax on your behalf, you may still be required to file a state sales tax return to that state. However, you will not have to remit any tax collected on your sales made through Etsy because we will remit these funds on your behalf. While it varies depending on the state, many will require you to report your gross sales made through Etsy (and all other outlets that are collecting on your behalf), in addition to reporting and remitting the tax you’ve collected on sales you make off Etsy.

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 feedback and are actively working with policy makers to express those concerns and explore solutions.

How you can join our advocacy efforts

We know that this patchwork approach to state sales tax can be frustrating and confusing for buyers, sellers, and even for the states that are implementing the new rules. That’s why we’re continuing to advocate for a federal solution that harmonizes and simplifies sales tax for online purchases.

If you want to help our advocacy efforts, write to your Member of Congress today, asking them to support a new bill that protects businesses like yours from these new laws.

Author

Margo Gorski

Margo is the Senior Manager on Etsy’s Tax Team. She sees taxes like a fortune cookie. On the outside there is a hard shell, often tough to break into, similar to the many obstacles seen through taxes. However, on the inside, the unraveled issue feels rather rewarding. In her spare time, Margo loves experimenting in the kitchen with her kids and baking cookies, of course.

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