Q+A on state sales tax

[FidosFlowers]

Recently, some states in the United States have introduced new kinds of sales tax laws that affect Etsy sellers, and sales into these states. Marketplace tax laws, like those in Pennsylvania and Washington, require marketplaces such as Etsy to collect and remit sales tax on orders shipped to addresses in those states on the seller’s behalf. In addition to these marketplace tax laws, some states have also changed their sales tax collection requirements for out of state sellers as a result of the recent Supreme Court ruling, South Dakota v. Wayfair, Inc.

These states have introduced new laws that require businesses to collect and remit sales tax to the state if they meet certain sales or transaction thresholds. If you make a high volume of sales (by value) into a single state or have reached a certain number of transactions, you may be required to collect and remit state sales tax to that state.

Learn more about marketplace sales tax laws here: https://www.etsy.com/seller-handbook/article/how-new-laws-impact-state-sales-tax/321914904041
Learn more about internet sales tax laws here: https://www.etsy.com/seller-handbook/article/understanding-internet-sales-tax-laws/417251291079

Help us advocate for a simple, federal, and fair solution for Etsy sellers by contacting your Congressperson here: https://action.etsy.com/USzxeDP

We know state sales tax laws can be confusing, so Etsy’s Tax Director Mike Mincieli, Manager of Public Policy and Research Ilyssa Meyer, and product specialists Madison Kiani and Rebekkah Phelan will be answering some of your questions in the Forums.

If someone else has already asked your question, you can vote for it, increasing it’s chance of being answered.

You can vote for specific questions by clicking the small thumbs up symbol in the top right corner of the individual post. While voting is enabled, members can vote for up to three questions. If you vote more than three times, your final three votes will count.

We’ll be collecting your questions until 9 PM EST today. And on Thursday, October 25, we’ll be back to answer some of the top voted questions in this thread.

And as with all of our Q+As, we we won’t answer questions that are off topic or that don’t adhere to our Forums community guidelines (you can read those here: https://www.etsy.com/legal/community). We also can’t give tax or legal advice that’s specific to your shop.

Thanks in advance for your participation here!

[TheBadgePatch]

Will Etsy be reporting individual shops sales and order numbers to each state?

I have never tracked either of those items per specific state. Is there an easy way to do this?

I am located in DE - the land of no sales tax - so this is all completely new for me.

[WetxPaint]

Hi Kelly, thanks so much for your question! At this time, Etsy automatically collects and remits sales tax for states that have passed online marketplace laws, which includes Washington, Pennsylvania, Oklahoma, and Minnesota. The information Etsy reports to each state is dependent on the laws passed by the state.

[WetxPaint]

Unless you otherwise have a filing responsibility in the state, there’s nothing further you would need to do. We take care of the filing and remitting. If you DO have a filing responsibility in a state, what you will file will again depend on the state. Often, you will simply need to note how many sales were made through a marketplace collecting on your behalf.

[WetxPaint]

If you are located in DE (or any other state) and do not have a filing obligation in WA (for example), there’s nothing additional you need to do now as a result of Etsy collecting tax on sales made into that state.

[WetxPaint]

For all other states, sellers are responsible for complying with the new sales tax laws. Sellers can use our sales tax tool to set up collection by location and rate: https://www.etsy.com/your/shops/me/tax. If you need more assistance understanding these new laws, we recommend speaking with a qualified local tax professional.

[CraftyCornishMaids]

That link just takes me to VAT info, it doesn't say what I have to do if I sell over the number of items to an american state

[WetxPaint]

Hi Heather,

Some states (like Washington) specifically exempt foreign sellers. Others are silent on the matter, or will expect all sellers to register, regardless of location. We encourage you to reach out to your local accountant.

[CatsBeadKitsandMore]

Colorado will be collecting taxes come Dec. 1. Will etsy collect them and remit them to the state like they do for Washington, Pennsylvania, etc,?

[GRITSGirlz]

https://www.salestaxinstitute.com/resources/remote-seller-nexus-chart

Per the above, CO economic nexus starts 12/1 (not Marketplace nexus), so it will be up to remote sellers to collect and report if they meet the minimum requirements.

[TepperWear]

hasn't Colorado already been collecting sales tax? But they're changing it to be destination sales tax instead of a flat rate?

[Girlfriendnecklace]

I think this is a question if answered yes would resolved the problem for most shops.

[agoodturnco]

As of 12/1 Colorado is requiring sellers based in Colorado who sell online to pay sales tax based on the (Colorado) recipient's local sales tax rate based on the recipient address. ie if a person who lives in Parker buys and their address equates to 9.84% tax (State+County+City), then you have to remit those taxes.

[PrairiePrimitives]

Will Colorado sellers be able to make up the difference on their own?

Until I filed my California sales tax this year, I had been making up the difference between the state-wide base sales tax of 7.25% and whatever the rate was at the in-state customer's location. When I filed my sales tax in July, I learned that I *don't* have to make up the difference!

[WetxPaint]

Colorado’s law is more like an economic nexus, or internet sales tax law, than it is like Washington or Pennsylvania’s laws for marketplace facilitators. Etsy will continue to collect and remit state sales tax on order shipped to states with marketplace sales tax laws.

[WetxPaint]

In the meantime, you may want to check directly with the state of Colorado for more information: https://www.colorado.gov/pacific/tax/information-state-retailers

[limegreenmodern]

The big thing that a CO seller needs to be aware of is that there are 73 self collecting home rule cities. What this means is that these taxes are NOT payable through the CO sales tax form we submit.

You have to individually contact each of these jurisdictions to pay the tax. It is an absolute nightmare. Yes, that could mean 73 separate tax forms to submit, as often as monthly. 73!! 😫

[limegreenmodern]

I have confirmed this information with the CO Dept. of Revenue.

I will be canceling and refunding sales to my OWN STATE until a more streamlined fix can be worked out.

CO sellers: See this thread-
https://www.etsy.com/teams/7722/discussions/discuss/18851822/page/3

[allearringsandsuppli]

I am also from a tax free state (NH) and want to know if Etsy will continue to collect and report the taxes from the different states or if they are not going to continue with this, when will they stop so that we know when to start monitoring it. Will the tax still be included in the sale?

[GRITSGirlz]

https://www.salestaxinstitute.com/resources/remote-seller-nexus-chart

Etsy will continue to collect and report to any state where Marketplace Nexus is indicated on the attached.

[WetxPaint]

Hi Toni! Today Etsy only collects and remits sales tax for states that have passed online marketplace sales tax laws. Check out the answer I’ve provided on Kelly’s similar question. You’re welcome to use our sales tax tool to set up collection and rates for other states: https://www.etsy.com/your/shops/me/tax. This will allow you to charge applicable shoppers sales tax when they purchase from you.

[ReImagineBrewing]

Esty; since sellers are paying a fair amount to use your services shouldn't you also provide services such as tax collection for any and all situations and not just some states? I would expect with fee increases to also have things like this handled.

Is there a reason why Etsy doesn't just start collecting sales tax for all states in these "transitions"? Then if a seller doesn't hit the thresholds set by specific states the prior sales tax paid gets refunded to customers or goes to the seller as revenue?

Since at the beginning of the year a seller doesn't know how many sales they will have in an individual state how do they know if they should collect sales tax?

Are sellers expected to absorb this amount when they hit these thresholds?

Should a seller try to guess which states we will hit the thresholds for and start collecting tax at the beginning of the year? However, if we suddenly grow and didn't collect in that state then we have to absorb the tax there?

This is quite the interesting mess that is starting and I think it is going to costs states more money trying to track down money than the sales tax they collect from online sellers. HOWEVER, Etsy will you please step up and assist us with collecting sales tax and remitting it. This I would expect to be something that Etsy gets involved with more than sending an email and having a Q+A Session.

Thank you.

[barkrock]

I would suspect that Etsy plans on following the law regarding collection of taxes.

State laws in PA and WA, for example, explicitly required Etsy to collect their tax. Other states require the seller to collect.

Personally, I agree...it's probably going to cost more in man hours and certainly in goodwill than states will ever collect.

[GRITSGirlz]

Etsy will collect for any state that has or implements Marketplace Nexus. See the info here:
https://www.salestaxinstitute.com/resources/remote-seller-nexus-chart

[ReImagineBrewing]

I understand Etsy being a Marketplace Nexus has to collect and remit the taxes.

However, how does Pattern or other online sales channels like square, PayPal & non-Etsy payment methods weigh in?

-On Etsy=100 WA Sales
-Square=101 WA Sales
-QuickPay=50 WA Sales
Am I at 151 sales & don't have to pay the Tax? OR do the Marketplace sales count towards my totals to have to collect/pay the sales tax.