Yes, Etsy does collect sales tax. Under state marketplace facilitator laws, Etsy calculates, collects, and remits U.S. state and local sales tax on your sales automatically, so you do not have to configure rates, collect tax from buyers, or send payments to state tax authorities yourself.1Etsy. How US State Sales Tax and Fees Applies to Etsy Orders That handles the collection side. It does not erase your own obligations around sales tax permits, periodic returns, and reporting your Etsy income to the IRS.
Which States Etsy Collects Sales Tax For
Etsy collects sales tax for orders shipped to every U.S. state and territory that imposes one. The rate is set by the buyer’s shipping address, combining state and local rates for that specific location, and it applies to physical goods as well as digital downloads in states that tax them.2Etsy. Taxes 101 – Understanding the Essentials
Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.3Tax Foundation. State and Local Sales Tax Rates, 2026 Orders shipped to those states generally arrive without a sales tax charge. Alaska is the exception within that group, because individual Alaska localities can impose their own sales taxes, and buyers in those localities may see tax on their receipts.
How the Tax Shows Up on Your Sales
When a buyer checks out, Etsy calculates the tax from the shipping address and shows it as a separate line on the receipt, apart from the item price and shipping. The tax money never lands in your seller balance. Etsy deducts it from the payment before depositing the rest into your Payment account.1Etsy. How US State Sales Tax and Fees Applies to Etsy Orders
To see the totals, open your Payment account and look under the Activity summary, in the Sales and fees section, for the line labeled “Sales tax paid by buyer (Remitted).” For a breakdown at the order level, download your orders spreadsheet. If a buyer paid through standalone PayPal instead of Etsy Payments, Etsy still handles the sales tax: it supplies the tax to you as part of the payment and then nets it back out of your Payment account.1Etsy. How US State Sales Tax and Fees Applies to Etsy Orders
What You Still Have to Do as a Seller
Etsy’s collection covers the transactional side. Depending on where you live and how you sell, you may still carry your own compliance duties.
Sales Tax Permits
Many states require sellers of taxable goods to register for a sales tax permit, sometimes called a seller’s permit. Whether you need one when Etsy is your only sales channel depends on your state. Some states exempt sellers who exclusively sell through a registered marketplace facilitator. Others require registration anyway. If you also sell through your own website, at craft fairs, or through any channel where no facilitator is collecting tax for you, you almost certainly need a permit in every state where you have economic nexus. Most states issue permits free or for a small fee.
A permit also lets you use a resale certificate when buying inventory or raw materials. With a valid certificate, you can skip sales tax on those purchases, since the tax will be collected from the eventual buyer. The certificate only covers items you plan to resell, not personal purchases or office supplies.
Filing Sales Tax Returns
Holding a permit typically means filing periodic sales tax returns even in months where you owe nothing. States assign a monthly, quarterly, or annual schedule based on your sales volume, with higher-volume sellers filing more often. On the return, you generally report your gross sales and then exclude or deduct the portion Etsy already remitted.
Missing a filing deadline can trigger penalties even when the tax due is zero. Penalty structures vary by state and can include flat fees, percentage-based fines, or both, and they stack across missed periods.
Records to Keep
Keep detailed transaction records: the item sold, the sale price, shipping charges, buyer location, and the sales tax Etsy collected. The downloadable order spreadsheets and monthly statements from Etsy are a solid starting point. Track your business expenses as well, including materials, shipping supplies, Etsy fees, and packaging, so you can support deductions at income tax time. Holding onto records for at least three to four years after you file covers the usual IRS audit window.
Income Tax and Form 1099-K
Sales tax and income tax are separate. Etsy handling one does not touch the other. You are still responsible for reporting your Etsy income to the IRS, and Etsy reports your gross payment activity on Form 1099-K when you cross the federal threshold: more than $20,000 in gross payments and more than 200 transactions in a calendar year.4Office of the Law Revision Counsel. 26 U.S. Code 6050W – Returns Relating to Payments Made in Settlement of Payment Card and Third Party Network Transactions That threshold was restored under the One, Big, Beautiful Bill Act, replacing the lower $600 threshold that had been scheduled under the American Rescue Plan but repeatedly delayed.5Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill Some states set lower thresholds of their own, so you may still receive a 1099-K if you live in one of those states even when you’re below the federal numbers.6Etsy. What Do I Need to Know About My 1099-K Tax Form
The gross figure on the 1099-K is not your taxable income. It includes total sales, shipping, refunds, sales tax collected through Etsy’s own sales tax tool, and even canceled orders, none of which have been adjusted out.6Etsy. What Do I Need to Know About My 1099-K Tax Form From that gross, you can deduct fees, refunds, shipping costs, and other legitimate business expenses to arrive at your actual taxable profit.7Internal Revenue Service. What to Do with Form 1099-K If you don’t receive a 1099-K, your income is not off the hook. All business income is reportable whether or not a form is issued.
Buyer Exemptions
Some buyers qualify for a sales tax exemption, such as purchases made for a qualifying nonprofit or items bought for resale. On Etsy, exemptions are a manual process handled between the buyer and the platform. The buyer contacts Etsy Support with the order number and valid exemption documentation for the delivery state. Many states accept a Multi-Jurisdiction Form from the Multistate Tax Commission or a Streamlined Sales Tax Form in addition to their own certificate.8Etsy. How to Make a Tax-Exempt Purchase on Etsy If Etsy accepts the documentation, it may refund the tax. As the seller, you take no action; the process runs entirely between the buyer and Etsy.
International Orders
Etsy’s tax collection extends beyond U.S. sales tax. In several countries, Etsy collects Value Added Tax (VAT) or Goods and Services Tax (GST) at checkout, subject to specific value thresholds:
- European Union: VAT is included at checkout for goods sold within the EU and for packages valued under €150 shipped into the EU from a non-EU country.
- United Kingdom: VAT is collected on packages valued at £135 or less shipped from outside the UK.
- Australia: GST is collected on orders of $1,000 AUD or less.
- New Zealand: GST is collected on goods sold to New Zealand buyers from overseas sellers.
- Norway: VAT is collected on packages with items under 3,000 NOK shipped from outside Norway.
- Singapore: GST is collected on physical items under $400 SGD shipped from outside Singapore.
- Canada: GST/HST is collected, along with provincial sales taxes in certain provinces.
When Etsy collects VAT or GST at checkout, the buyer should not be charged again on delivery.9Etsy. Will I Have to Pay for Tax, Customs, or Tariffs on My Order For orders above the listed thresholds, or to countries where Etsy does not collect tax, the buyer is responsible for import duties, taxes, or customs fees on arrival. Fill out customs forms accurately, with truthful item descriptions and declared values, so packages don’t get held up or hit your buyer with surprise charges.
Use Tax on Supplies You Buy
Sales tax has a companion called use tax. If you buy a taxable item without paying sales tax and then store, use, or consume it in a state that imposes tax, you may owe use tax to your own state at the same rate as its sales tax. For Etsy sellers, this most often comes up when buying supplies, tools, or raw materials from vendors who don’t collect your state’s tax. If you use those items in your business rather than reselling them, you may need to self-report and pay use tax to your state. Many states include a use tax line on the annual income tax return.