The Ultimate Etsy Sales Tax Guide

Repeat these steps for all the states where you want to collect the sales tax. In the previous example, we calculated that your self-employment tax is $706. So you can deduct 50% of this amount from your taxable income.

If you’re under 65 and filing as an individual, you must declare your hobby earnings if they total $12,400 or more when combined with your other income. You will still pay listing fees, transaction fees, and other charges as you sell on Etsy. Certain payments are not considered to be “Etsy-processed payments”, for purposes of Form 1099-K. That includes payments through your PayPay account, checks, money orders, and so on. Selling on Etsy may be one of the easiest and fastest ways to get into business for yourself. Just because getting started in online sales is fast and easy doesn’t mean you’re not a “real” business – especially in the eyes of the Internal Revenue Service .

Do I have to pay sales tax if I sell on Etsy?

When you’re shipping your products to a different country, you may need to collect any import taxes or customs duties imposed by the destination country from your buyers. From this point on, any new listing you create on Etsy will have the tax rate applied by default. If you need to remove the sales tax from any particular item, just uncheck the box when creating the listing. However, Etsy has taken this responsibility on its own as they now automatically calculate, collect, and remit sales tax on your behalf. You also can’t know the actual deductible business expenses or losses. And for this reason, the IRS will not hand you any penalties as long as you pay an equal amount of tax as you did last year.

If you sell outside of those states, however, collecting sales tax might be your responsibility — whether you’re doing big business on the site or just starting out. Below are five things you should know about sales tax on Etsy. Whether you are advertising your shop, buying supplies, or mailing your products, every business-related expense can be deducted. In most cases, any money you spend on your Etsy shop is deductible. In order to qualify as a deduction, business expenses must meet IRS standards of being “ordinary and necessary.”

Schedule C and Schedule C-EZ

If Selling On Etsy & Your Taxes an online seller, you may have sales tax nexus in multiple states, and each state may require you to collect and remit sales tax. Sales tax laws have changed considerably as more and more retail takes place over the internet. As a result, online businesses, including Etsy Shops, are responsible for collecting sales tax when shipping their products to a certain location within the United States. As laws change, determining which products Etsy sellers need to collect sales tax on can become even more complicated. For example, Washington exempts candy from sales tax, but not if the candy needs to be refrigerated. And the sale of yarn in Pennsylvania is subject to sales tax, but not if the yarn is used to make clothing.