As we reported, Amazon began collecting Washington sales tax on behalf of third-party merchants beginning January 1, 2018. What we didn't know until today is that Etsy is also collecting Washington state sales tax for its sellers, even those located overseas - and it's causing confusion and concern among sellers.
Note: see update below.
Some sellers discussing the new practice on Etsy boards said it came as a surprise because the company hadn't notified them about the change. We asked Etsy today, and a spokesperson sent us a link to a
help file and said they'd get back to us with answers to our questions.
One reader was unhappy with the change in part because Etsy charged payment processing fees on the tax portion of the transaction, even though the transaction was made through Etsy Payments (where Etsy is the merchant of record), not through "standalone PayPal," which would be her own PayPal account.
The
Washington Department of Revenue states, "Marketplace facilitators that collect sales tax on third-party sales must pay the sales tax directly to the Department of Revenue. They may not give the collected sales tax to their marketplace sellers."
The seller said because Etsy collects the tax, it gets to use the amount collected until remittance time - "So why do I have to pay fees on the cash flow that Etsy gets to use until they have to pay WA state???"
We found
one thread where an Etsy moderator addressed a question about the new practice:
"To clarify, with standalone PayPal orders, the sales tax is charged to the buyer and included in the payment you receive in your PayPal account. We then place an equal charge on your monthly bill to recoup the sales tax that was charged to the buyer. Then, Etsy is required to submit to the State of Washington. Thanks!"
He didn't address what happens in cases where orders go through Etsy Payments.
One seller from the UK was irate that they would have to pay sales tax for Washington state. Another seller was concerned that Etsy would be reporting the tax on 1099-Ks to the IRS as income, "So I'll have to explain why my 1099-K is higher than what I report and actually bring in."
TaxJar reported in November that Amazon would begin collecting Washington state sales tax and is following the issue on
this blog post.
Have you checked your statements to see if the venues on which you sell are collecting Washington sales tax on your behalf?
Update 1/9/18: Etsy provided us with the following statement on Monday:
"On January 1, 2018, Etsy began collecting and remitting Washington state sales tax on behalf of all sellers selling to Washington buyers, per new WA state legislation. No action is required by Etsy sellers and they will no longer be able to collect and remit tax on goods sold to buyers in WA state; however, sellers will continue to be responsible for researching their local laws about collecting and reporting taxes for their Etsy sales for all other states. For more information, sellers can refer to our Sales Tax for Washington State help article."
The AuctionBytes Blog has been giving a voice to online merchants since its launch in 2005. Named one of the world's top 30 blogs in 2008 by "Blogging Heroes." Weigh in with your thoughts on the joys and pitfalls of selling online.
Etsy Springs Sales Tax Surprise on Sellers
by: cfrphoto 
by: Rexford 
by: Ina