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Etsy Adds to List of States for Which It Collects Sales Tax

Etsy Adds to List of States for Which It Collects Sales Tax

Etsy has added to the list of states for which it collects sales tax under Marketplace Facilitator laws. For Etsy-only sellers, such laws can simplify compliance issues, but for multi-channel sellers, such laws add yet another wrinkle to the herculean task of calculating, collecting, reporting, and remitting sales tax for each and every state that imposes a sales and use tax.

Etsy said in response to new laws, it started or will start collecting and remitting state sales tax on orders shipped to the following states:

Washington (January 1, 2018)
Pennsylvania (April 1, 2018)
Oklahoma (August 1, 2018)
Minnesota (October 1, 2018)
Iowa (February 1, 2019)
Connecticut (February 1, 2019)
South Carolina (February 1, 2019)
South Dakota (March 1, 2019)
New Jersey (April 1, 2019)
District of Columbia (April 1, 2019)
Alabama (July 1, 2019)

One thing that may jump out at readers: Etsy announced it has plans to collect sales tax for 10 states and the District of Columbia in 2019, while eBay plans to collect sales tax for 8 states. (The timing of the implementation also varies between the two marketplaces.)

So even the tax experts at publicly traded corporations can’t agree for which states they’re obligated to collect? To be fair, things are more clear-cut for Etsy, since it processes the majority of payments on behalf of sellers, while eBay is in the process of rolling out managed payments.

Because some sellers on Etsy were grandfathered into being able to use their own PayPal account, Etsy explained, “For orders placed through standalone PayPal, the sales tax collected is sent to you as a part of the payment. Then, Etsy will add the sales tax amount to your Etsy bill so that we can remit the tax to the state.” That adds yet another wrinkle for small sellers trying to comply with all of these varying laws!

Etsy made it clear it’s no picnic for itself, either:

“These laws continue to be introduced in various states, creating a patchwork of requirements for us and our buyers and sellers. Because each state has their own set of rules and requirements, Etsy must make a determination about how to proceed on a case-by-case basis.

“In Washington state and Pennsylvania, we were required to begin collecting and remitting state sales tax while the states simultaneously implemented these new rules. Our experience in these states so far has shown us how hard it is to properly classify the 50 million handmade, craft, and vintage goods available on our marketplace into taxable item categories. For example, sales of yarn in Pennsylvania are subject to tax, but not if the yarn is for use in clothing. Washington exempts candy from tax, but not if that candy needs to be refrigerated.”

In its announcement, Etsy said it was working with states to simplify the process for Etsy sellers as states implement their new sales tax rules, and explained how sellers could join its advocacy efforts:

“We know that this patchwork approach to state sales tax can be frustrating and confusing for buyers, sellers, and even for the states that are implementing the new rules. That’s why we’re continuing to advocate for a federal solution that harmonizes and simplifies sales tax for online purchases.

“If you want to help our advocacy efforts, write to your Member of Congress today, asking them to support a new bill that protects businesses like yours from these new laws.”

You can (and probably should) read the full announcement on this page of the Etsy website.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.