The online sales platform Etsy makes it easy for sellers to stay compliant by automating most of the sales tax process. But if you’re an Etsy merchant, it’s important to stay informed about local and international tax obligations, especially if you sell items outside the U.S. or in regions where Etsy doesn’t automatically collect sales tax.
Here’s a look at the tax rules for collecting and remitting sales tax when you’re an Etsy shop seller.
Does Etsy collect sales tax?
Etsy automatically calculates, collects, and remits sales tax on orders shipped to most U.S. states, so you don’t have to. In cases where Etsy isn’t required to collect sales tax (such as international transactions), you may still be responsible for determining and remitting sales tax to the proper authorities.
Some states require sales tax on Etsy’s seller fees (like listing or transaction fees). Etsy calculates and charges this tax where applicable. You can find this amount on your monthly invoices.
Which states require sales tax on online purchases?
Many states have created economic nexus standards to require certain e-commerce businesses to collect sales tax. Etsy collects and remits sales tax for you on orders shipped to these states:
- Florida
- Kansas
- Hawaii
- Illinois
- Michigan
- North Carolina
- Georgia
- Louisiana
- Mississippi
- Tennessee
- Iowa
- Connecticut
- South Carolina
- South Dakota
- New Jersey
- District of Columbia
- New York
- Idaho
- Nebraska
- Alabama
- Arkansas
- Kentucky
- New Mexico
- Rhode Island
- Virginia
- West Virginia
- Wyoming
- Vermont
- Indiana
- Ohio
- Arizona
- California
- Maine
- Massachusetts
- North Dakota
- Texas
- Utah
- Wisconsin
- Colorado
- Maryland
- Nevada
- Washington
- Pennsylvania
- Oklahoma
- Minnesota
Each state has its own requirements, and most are intended to impose sales taxes on larger online retailers in an effort to protect small businesses. These requirements are determined by amounts set by the state, called thresholds, which are based on factors like gross sales and number of transactions.
You can see the requirements for charging online sales tax in each state here. Your state’s department of revenue website is always a reliable resource as well.
Origin vs. destination sales tax
The difference between collecting sales tax on an origin or destination basis has to do with where the tax rate is determined in a transaction.
With origin-based sales tax, the amount of tax is calculated based on the location of the seller (the origin of the sale). The seller applies the tax rate of their business location, regardless of where the buyer is located.
With destination-based sales tax, the amount of tax is calculated based on the location of the buyer (the destination of the goods or services). The seller applies the tax rate of the buyer’s delivery address or pickup location.
Which states have no online sales tax?
Delaware, Montana, New Hampshire, Oregon, and Alaska do not currently have a statewide sales tax or online sale sales tax. However, Alaskan localities can impose sales tax, and some are in the process of establishing online sales tax regulations.
Do I have to collect sales tax on out of country sales?
If you are an international seller with no physical presence or sales in the United States, you are not required to collect U.S. sales tax.
If you are an international seller with no physical presence in the U.S., but some of your sales are within the U.S., you may have to charge sales tax on your sales within the U.S. (depending on the requirements for the states in which you make sales).
How to file Etsy sales tax
For Etsy sellers, the process of filing sales tax is simplified due to Etsy’s compliance with marketplace facilitator laws. These laws require Etsy to collect and remit sales tax on behalf of its sellers for most U.S. states.
Even though you generally don’t need to remit sales tax for transactions that are facilitated by Etsy’s platform, you may still need to report these sales when filing your state income tax return.
