Etsy collects and remits sales tax on your behalf in most U.S. states

Etsy automatically collects sales tax from buyers in states where Etsy is required to do so. You do not collect the tax yourself at checkout — Etsy deducts it from your seller payout. Etsy then sends that tax money to the state on a schedule set by state law, usually monthly or quarterly.

This applies to physical goods sold through Etsy's marketplace. Digital downloads, services, and certain other items have different rules that vary by state. The states where Etsy collects tax have grown over time as state laws changed, so the list is not fixed.

Your responsibility as a seller is to understand whether your specific products are taxable in the states where your buyers live, and to set your shop settings correctly so Etsy can collect the right amount.

Key Takeaways

  • Etsy collects sales tax automatically from buyers in states where it is required, and you see the after-tax amount in your payout.
  • You must tell Etsy your shop location and what you sell so the system knows which states' taxes apply to your products.
  • Physical goods are taxable in most states; digital items and services follow different rules that depend on the state.
  • Etsy does not collect tax in every state, and some states have no sales tax at all, so your tax obligation depends on where your buyer is located.
  • If Etsy does not collect tax in a state where you owe it, you are responsible for remitting it yourself to that state.

Which states does Etsy collect sales tax in

Etsy collects sales tax in most U.S. states, but the exact list changes as state laws change. As of 2024, Etsy collects in the majority of states that have a sales tax. States with no sales tax — currently Alaska, Delaware, Montana, New Hampshire, and Oregon — do not have Etsy collections because there is no tax to collect.

Some states have specific rules about what types of sellers must collect tax. For example, a state might require tax collection only from sellers above a certain sales threshold, or only for certain product categories. Etsy's system is designed to follow these rules automatically, but you should verify your state's current requirements because they can change.

The best way to know whether Etsy is collecting tax on your sales is to check your shop settings under "Sales and Tax" or to look at a recent payout and see whether tax was deducted. If you are unsure, Etsy's seller help center lists the states where it collects tax, though you may need to contact your state's tax authority for the most current rules.

What happens if Etsy does not collect tax in your state

If you sell in a state where Etsy does not collect tax, you are responsible for collecting and remitting sales tax yourself — even though Etsy is not doing it. This is your legal obligation as a seller, not Etsy's.

You will need to register for a sales tax permit in that state, collect tax from buyers at the time of sale, and remit it to the state on the schedule that state requires. Some states require monthly remittance; others allow quarterly or annual filing. Failure to remit can result in penalties and interest.

To find out whether you owe sales tax in a state where Etsy does not collect, contact that state's department of revenue or tax authority directly. They can tell you the threshold (if any) above which you must collect, the tax rate, and the filing deadline.

How to set up sales tax in your Etsy shop

Go to your Etsy shop settings and select "Sales and Tax." Etsy will ask you to confirm your shop location and the types of items you sell. Based on this information, Etsy's system determines which states' taxes apply to your products.

You can also manually add tax rates for states where Etsy does not collect automatically. This is useful if you are required to collect tax in a state but Etsy is not doing it for you. When you add a manual rate, Etsy will collect that tax from buyers in that state and hold it for you to remit.

If you sell both taxable and non-taxable items — for example, physical goods and digital downloads — you may need to set different tax rules for different listings. Etsy allows you to do this at the listing level, so you can mark digital items as tax-exempt while keeping physical goods taxable.

Physical goods versus digital items and services

Physical goods are taxable in nearly all states. This includes handmade items, vintage goods, supplies, and anything else you ship to a buyer. Etsy collects tax on these items in most states automatically.

Digital downloads — such as printables, patterns, or digital art files — are treated differently depending on the state. Some states tax digital goods; others do not. Some states tax only certain types of digital items. Because the rules vary widely, you should check your state's tax authority to know whether your digital products are taxable.

Services, such as custom design work or consulting, are generally not taxable in most states, though some states have specific rules. If you offer services through Etsy, mark them as non-taxable unless your state specifically requires tax on services.

What to do if you disagree with Etsy's tax collection

If you believe Etsy is collecting tax incorrectly — for example, if tax is being collected on items you think should be exempt, or if the rate seems wrong — contact Etsy's seller support first. Explain the issue and provide the state law or regulation you are relying on. Etsy can sometimes adjust your shop settings or provide a refund if there was an error.

If Etsy does not resolve the issue, contact your state's tax authority directly. They can tell you whether the tax collection is correct under state law. Keep records of all your Etsy payouts and tax deductions so you can show the state what was collected and when.

Do not assume that because Etsy collected tax, you have no further obligation. Some states require sellers to file a return even if tax was collected and remitted by the marketplace. Check with your state to confirm what paperwork you need to file.

Frequently Asked Questions

Do I have to charge sales tax on Etsy if I have a reseller certificate?

A reseller certificate exempts you from paying sales tax when you buy inventory, but it does not exempt you from collecting tax when you sell to end consumers. Etsy will still collect tax on your sales in states where it is required. The reseller certificate is for your purchases, not your sales.

Will Etsy send me a 1099 for the sales tax it collected?

No. Sales tax collected and remitted by Etsy is not income to you — it is a liability that Etsy paid on your behalf. Etsy does not report it as income on a 1099. Your income is the amount you received after tax was deducted.

What if a buyer is from a state with no sales tax but I ship to a state that has tax?

Sales tax is based on where the buyer is located, not where you ship from. If the buyer is in a state with no sales tax, no tax is collected, even if you are in a state that has tax. Etsy's system uses the buyer's address to determine which state's tax rules apply.

Can I add sales tax on top of my Etsy price?

No. Etsy collects tax at checkout and deducts it from your payout. You cannot add an additional tax charge on top of the price you set. If you want to account for tax in your pricing, you would need to set your item price higher to begin with, but this is not recommended because it can confuse buyers.

Do I need to file a sales tax return if Etsy collected and remitted the tax?

This depends on your state. Some states require sellers to file a return even if tax was collected by the marketplace; others do not. Contact your state's tax authority to find out what forms you need to file and when they are due.