Many sellers were caught off guard in January when some marketplaces including Etsy began collecting sales tax on purchases originating in Washington state thanks to its new law. Pennsylvania has fallen in Washington’s footsteps and is forcing marketplaces to comply with the same requirement.
A reader forwarded a message they saw in their Etsy account last week:
Sales Tax for Washington and Pennsylvania
Based on applicable tax laws, Etsy will calculate, collect, and remit sales tax for orders shipped to customers in the following state(s):
We’ll be fine-tuning our processes over the next few weeks, so you may only see this change reflected in some orders shipped to Pennsylvania until the changes are fully rolled out.
State / Effective Date
Washington / 01/01/2018
Pennsylvania / 04/01/2018
No action is required on your part.
There are no charges or fees for Etsy automatically calculating, collecting, and remitting sales tax.
Sellers do not have to update their sales tax settings in their shop for orders shipped to Washington state or Pennsylvania state in the US. Those tax settings are used for states/regions where Etsy does not automatically collect sales tax.
Sellers cannot opt out of Etsy automatically collecting sales tax for items shipped to customers in Washington or Pennsylvania.
Note: Etsy sellers do not need to remit sales tax on their Etsy sales to a state where Etsy remits sales tax on your orders.
Purchases via Paypal
If a buyer in Washington or Pennsylvania state purchases the order via PayPal, Etsy will supply the seller with the sales tax as a part of the payment. Then Etsy will add a fee for the sales tax to your Etsy bill so that we can remit the tax to the state of Washington or Pennsylvania.
The sales tax will be included in the order information, and the fee for the sales tax will be on your Etsy itemized bill – including the relevant order number. The fee will be summed in the subcategory in your fee summary under Sales Tax Fees.
For orders shipped to customers in all other states
If you sell physical goods on Etsy and reside in the US or Canada, you have the option of either including applicable taxes in your listing prices, or excluding applicable taxes from your listing prices and then using Etsy’s sales tax tool to calculate the tax owed on each sale.
To access the sales tax tool go to Shop Manager > Finances > Payment settings. Then, select the Sales Tax tab.
It’s interesting how a marketplace like Etsy deals with transactions in which the buyer pays the seller instead of Etsy (that’s the case because some sellers were grandfathered in to allowing their own PayPal account to be a payment option – in most cases, buyers paying using PayPal are using Etsy’s PayPal account).