Go into Help & look under Managing Orders.
To cancel a transaction or order:
•Go to Your Shop > Sold Orders
•Find the order or transaction you need to cancel. Click Receipt for # above the transaction info.
•If your order was paid via direct checkout, in the Order section of the receipt page, let your mouse hover over Manage order and click Cancel transaction.
•If your order was paid for via another payment method, in the Order section of the receipt page, click Cancel a transaction.
•Fill out the form to request cancellation of some or all transactions within the order. Etsy will send a notice to both you and the buyer by email.
Cancellations process within 48 hours. Your Etsy bill will be credited for the applicable fees, and the transaction will move to the Canceled tab on your Sold Orders page.
You'll receive a receipt from Etsy by email when your cancellation is processed.