How To Create A Report Of Your Etsy Sales Taxes
Now that we have a good understanding of what sales tax is and how it works with Etsy, letâs look at how to generate a report of your sales tax collected.
Unfortunately, Etsy doesnât provide your sales tax tallies in a lovely, easy to generate and download type of report. Boo!
And, although your Etsy Stats page gives you the sales total for a time period, but itâs not always correct and up to date. In particular, it doesnât include any shipping amounts, which is important if your state taxes require shipping to be included.
To find your sales tax report figures, youâll need instead to navigate to a slightly hidden away area of Etsy to generate a download file which youâll then be able to use to filter out your nexus state sales.
This means youâll need to do a little bit of legwork to get the numbers you need for your sales tax filings.
To do this, youâll want to follow these steps:
What Do I Need To Know Before Selling Items On Etsy
Creating a business and selling items on Etsy means that you will have to report your earnings and pay taxes on that income. There is also a high possibility that you will need to pay self-employment tax as well. Keep in mind that in some locations you will be responsible for collecting sales tax. You may also need a business license depending on your location and the types of items you sell.
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Which Products Are Exempt From Sales Tax On Etsy
Some items may be exempt from sales taxes on Etsy depending on what the item is and who it is being sold to. There are hundreds of tax-exemption examples, but three general rules for tax exemption are items that are considered to be grocery items, items that are considered to be wholesale or are meant to be resold after purchase, and items that are sold to buyers who represent tax-exempt organizations. Different states will look at these three categories differently, and not all states or local municipalities will accept these reasons for tax exemption.
As a seller on Etsy, you are not required to provide tax exemption unless the seller buying from you provides acceptable documentation for tax exemption. If a seller comes to you asking for tax exemption, you should always consult Etsy before permitting the tax exemption. Etsy will likely collect sales tax on the transaction between you and the seller before refunding the sales tax to the seller from your transaction.
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Making Sense Of Your Tax Forms
As a business owner, youre introduced to lots of new tax forms. Get an overview of the basics including: 1099-K, Schedule C, and Schedule SE.
Whats so easy about the Schedule C-EZ? Whats this 1099-K I received in the mail? As a small-business owner, youre introduced to an entire alphabet of new tax forms. Keep reading to learn more about the Form 1099-K, 1040, Schedule C, Schedule SE and Schedule C-EZ forms.
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Do I Need To Add Sales Tax On Etsy
Etsy collects sales tax automatically, and there is no action required on the sellers part when it comes to sales taxes. Etsy does not charge you, as the seller, any fees for the automatic calculation and collection of sales tax on orders.
As of 2023, Etsy calculates and collects sales tax for all 46 states where online sales tax is required to be remitted and for both the District of Columbia and Puerto Rico. In the past, sellers were required to calculate and collect sales tax for some of these states and territories on their own however, this is no longer a requirement, and Etsy shop owners do not need to add sales tax to their shop items themselves.
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Etsy Sellers Frustrated By Companys Confusing Approach To New Sales
For nearly a decade, Margaret Maringgele and her husband Hubert have sold handmade wooden Christmas ornaments from their home on Vancouver Island through the online marketplace Etsy.
Before she retired, Ms. Maringgele worked in banking and accounting. But even with that background, she said, recent changes that Etsy has made to comply with a new federal sales-tax law have suddenly turned selling on the platform into a serious bookkeeping headache.
Were forced to either overcharge some customers or take a hit on our profit margins on others, she said. Its a nightmare.
Etsy Inc. ETSY-Q is one of the largest online marketplaces for small-business owners who specialize in handmade goods and vintage items. According to the U.S.-based company, it has 378,000 sellers in Canada who made a combined $15.5-billion in sales in 2021.
On social media and on the Etsycommunitys message boards, sellers have increasingly complained about how the company has responded to the new federal law meant to ensure digital platforms including such giants as Amazon.com Inc. AMZN-Q and Netflix Inc. NFLX-Q are charging sales tax to their Canadian customers.
But Etsy has chosen a more complicated approach.
You should adjust your listing prices to collect any required taxes, then remit it to the appropriate tax authorities with your GST/HST or your QST filing.
Save Money To Pay Taxes Including For Income Tax And Self
If your total income from self-employment is $400 or more, you must pay self-employment tax in addition to income tax come tax time. You only pay self-employment tax on your income after expenses.
Make sure to set aside a portion of your sales on a regular basis for federal and state taxes. Or, if you also have wages as an employee, consider increasing your tax withholding from your pay using Form W-4. By planning for your taxes now, you can avoid a surprise tax bill when you file your return.
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How Sales Tax Works
The first thing you need to do in your journey to managing sales tax is to figure out your nexus states.
These are the states where you do business, and meet their criteria for nexus. This might be exceeding their revenue threshold, but it might also be:
- A state where you store inventory. For example, if you use for your Etsy fulfilment, then every warehouse location that holds your inventory would qualify you for nexus there.
- A state where you have staff. If people work for you remotely, then you are considered to have nexus with their location state.
- State/s where your suppliers are located. If you operated a dropshipping business then the location of your supplier/s would come into play too.
- The states of any affiliate partners. If you have affiliate partners, you may need to take their states nexus rules into consideration.
Make a list of all the locations in the US associated with your business on some level. This will give you a starting point for checking criteria and eligibility.
Sales Tax: No Longer A Blurred Line For Ecommerce
Sales tax used to be a bit of a blurred line for ecommerce sellers.
Unless a business owner had a physical address in a state, they werent obligated to collect and remit sales tax.
This suited back in the day before ecommerce even existed, let alone was worth trillions. But the numbers went up, and so did the expectations of states.
It was worth too much money to ignore. In fact, by the time the new ruling took place, it was estimated that around 45 states were losing approx. $33 billion a year as a result.
And traditional brick-and-mortar stores were at a disadvantage, still subject to the sales tax admin online sellers were able to avoid.
In 2018, the landmark ruling of Quill v. Wayfair changed the landscape for ecommerce sellers for good. Sales tax had come for them.
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Ive Been Collecting The Above Tax What Do I Do Now
Youll no longer need to collect this tax for transactions completed through the Airbnb platform from guests who book their reservation on or after July 1, 2022.
UPDATE: Poshmark has told Canadian sellers today that it will collect GST and HST on the sellers behalf come July 1, and has posted this form so that sellers can declare Poshmark as their tax-collection agent. The email stated: Poshmark will be taking on this responsibility for all of our sellers to help simplify your experience and alleviate your need to accurately collect and remit tax to the appropriate authorities. Poshmark had a choice, and they chose to make it easier for the small businesses selling on their site.
So Etsy has a multitude of options to comply with the new laws, but has chosen the one that puts the most hardship on sellers while it adds extra income to Etsys bottom line.
How To Register For Self Assessment
If you earned over £1,000 from self employment in the tax year a tax year runs from 6 April one year to 5 April the following year you need to register with the tax authority by 5 October.
untied can take care of registration for you, or you can register yourself via the HRMC website.
Dont worry if youve missed the 5 October deadline to register, we can still help you. Get in touch with us at
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You Might Still Need To File A Sales Tax Return Even If Etsy Collects Taxes For You
The state where your Etsy shop is physically located, generally where you live, may require you to file a sales tax return. If you’re in a state where Etsy collects and pays your sales tax for you, this will generally mean reporting your sales and indicating that Etsy has already collected and remitted taxes on those sales. If you’re located in a state that requires you to collect sales tax yourself, report and remit those funds.
A Guide On Etsy Taxes For Sellers In Canada
As part of any online business that operates in North America, its important to comply with the tax rules, and youll need to learn about Etsy taxes in Canada. Like the other e-commerce platforms, Etsy makes it easier for creatives to get customers worldwide.
Etsy shop owners should pay taxes like any other profit-making business. There is also the need to know all the laws concerning taxes and the paperwork required for personal and your business’s safety.
However, it is not a surprise that most Etsy shop owners don’t fully know about taxes in Canada. Hopefully, you will understand how much tax to pay, depending on your Etsy shop’s income, with the help of this guide. You also need to know different types of taxes for Etsy shop owners according to the law.
Without further ado, let us get started.
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Is Your Etsy Shop For Business Or Hobby
If you have listed your Etsy shop for hobby purposes, but it makes sales, the government recognizes it as a business, and you must pay taxes. However, if your shop does not expect profits, it is recognized as a hobby.
Nonetheless, if the shop is something you spend a lot of time in and the primary objective of creating it is to make sales and a profit, then it is a business, and you must pay taxes. If you started as a hobby and have started making profits, fill out the right tax forms to be safe with the government.
Determining Where To Charge Etsy Sales Tax
The standard procedure to handle sales tax in the past required determining if your business had a nexus with a particular state. If your business was located in a state or had a significant amount of sales in that state, you would be required to pay sales tax.
Now the requirement has been broadened to a degree. States have been permitted to set their own policies. Requirements vary, but some states like South Dakota require sales tax paid on a purchase if a seller has made $100,000 or has had at least 200 transactions with customers of a given state.
You will definitely need to charge a sales tax in states your company has a presence in, but taxes for other states may depend on the specific state requirements and how much business you have there.
Montana, New Hampshire, Oregon, Alaska, and Delaware do not collect any sales tax at the state level, although towns and cities within these states might collect their own.
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What Is An Etsy 1099
A 1099-K is a document that summarizes the gross sales income of anyone who:
- Earned at least $600 through gross sales
- Got paid through a third-party payment processor, like a credit card, gift card, PayPal, or online marketplace â such as Etsy
Etsy will also send a duplicate 1099-K to the IRS, so itâll know exactly how much you earned from the platform.
Note: Your gross sales income is the total amount of money you earn from sales. It doesnât include the write-offs you subtract to find your taxable income.
Here’s To Stress Free Sales Reporting
I hope this post has helped you know exactly how to record your Etsy sales in your books. With a little knowledge, and the right tools in place, you can sit back and watch the sales roll in, safe in the knowledge that you know exactly how to record each one.
No more stress or worry and plenty of time saved to get back to the business you love.
Sarah x
Why not Pin this so you can come back to this article later?
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Do You Need A Tax Id To Sell On Etsy
All U.S. Etsy sellers are required to provide a business or individual tax ID to Etsy for income tax to be reported to the United States Internal Revenue Service . This may either be an individuals social security number if the business is taxed as a sole proprietorship or partnership, or a business taxpayer ID from the IRS, which is officially called an Employer Identification Number .
Related: How to apply for an Employer Identification Number
As of 2023, all sellers who make a revenue of over $600 in sales will have their Etsy income automatically reported to the IRS. However, all Etsy sellers are also advised to report their income taxes properly with their local, state, and federal governments.
Etsy does not collect or issue these licenses. However, your Etsy business may still be required to have a valid sales tax ID according to your local or state regulations. In essence, this license is given to businesses that will be responsible for reporting and sales tax collections in those states.
Related: State guides for registering for a sales tax permit
Sales tax laws are very complicated, and I recommend getting tax advice from a CPA or service like 800-Accountant rather than trying to figure it out on your own, as a mistake can be costly.
This material is property of StartingYourBusiness.com
What Is A 1099
The 1099-K form reports credit card payments you received from a third party. Since Etsy Payments processes credit card payments for sellers, a 1099-K form must be provided to sellers earning over $600 per year. A corresponding form must also be filed with the IRS.
Accordingly, your 1099-K form will reflect your gross sales revenue from Etsy Payments. Sales made through Etsy Payments include credit card, debit card, or Etsy Gift Card transactions, as well as local bank transfer payments in certain European countries.
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Research The State Sales Tax Laws And Rate
Once youve identified the states where your business might have nexus, its time to determine the tax rates you should charge to orders shipped to shoppers in those states. A quick online search for the state and sales tax laws should bring you to a .gov site that will be able to tell you:
- The state sales tax rate
- Any city sales tax rates
- Which items youre required to charge sales tax on
- Additional details like when your sales tax is due to the state and what kind of paperwork youll need to submit
The Federation of Tax Authorities also publishes a list of the tax authorities in each state.
Generally, youll be required to collect state sales tax on most, but not all, physical goods you sell. Goods that are exempt from sales tax may include food and childrens clothing. However, each state has a unique list of taxable goods, so be sure to check your states tax rules to see if your products fall into an tax exempt category.
What Can I Expense When I Sell On Etsy
When it comes to expenses, you should apply common sense when deciding what to deduct. HMRC will accept any reasonable business expense that you have, as long as you have evidence of the cost.
Make sure to keep all your receipts or even make a spreadsheet of them at the start of every tax year.
Common expenses when you sell on Etsy:
- Etsy seller fees
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