Etsy Shows State Taxes Are Contagions

Etsy invited sellers to help it advocate for a simpler federal alternative to state sales tax collection requirements. It put together charts showing when it began collecting sales tax for each state, and they demonstrate how when one state gets an idea for how to collect taxes more easily, the rest quickly jump on board.

In 2018, Etsy began collecting sales tax for four states due to Marketplace Facilitator laws.

In 2019, it began collecting for another 16 states.

In 2020, it began collecting for another 8.

And so far in 2021, it began collecting for another one.

“We expect more states will attempt to pass similar laws or regulatory changes in the future,” Etsy said. “We’ll let you know when anything changes, and if and when we start collecting states sales tax on orders shipped to more states.”

Demonstrating how complicated things are for online sellers, Etsy explained:

“If you have a physical presence in a state where Etsy collects and remits state sales tax on your behalf, you may still be required to file a state sales tax return to that state. However, you will not have to remit any tax collected on your sales made through Etsy because we will remit these funds on your behalf. While it varies depending on the state, many will require you to report your gross sales made through Etsy (and all other outlets that are collecting on your behalf), in addition to reporting and remitting the tax you’ve collected on sales you make off Etsy.”

Etsy said it continues 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,” it said.

You can view the full post with links to resources on the Etsy Seller Handbook.

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/.