I've been asking Etsy for paperwork to prove what they're doing with the tax money they collect on my behalf supposedly .they cannot give me any answers keep referring me back to the CSV files which do not show anything about taxes. It would be nice to be able to talk to a live person to get things straight on this issue Etsy is a big enough company you would think that they would have some sort of tech support they fail on this issue
There is a breakdown of fees, taxes, etc. in your payment account. When taxes are collected, they go to the relevant tax authority, as disclosed in your payment account. What paperwork do you need, exactly? Assuming the sale is made to a person in, say, New York, the taxes go to the State of New York. Etsy does this because it's required: not because they like to. Do you suspect that they are not remitting those taxes? I don't understand why you need paperwork to prove this.
Etsy is doing you a favor by collecting and remitting taxes collected on sales made from your account and shipped to districts where taxes are required to be paid. Otherwise, you would have to file a return and remit the taxes yourself for each and every district (generally for State sales tax, sometimes for the County, too) for each and every sale you make. Not to worry, Etsy is remitting the taxes as required. Be grateful you don't have to do it yourself. (I'm familiar with all of this as a retired CPA - not looking for new business.) Etsy is under no obligation to prove to you that they are remitting the taxes to taxing authorities.
This is one of the HUGE benefits of doing business on Etsy. I often think of this benefit when I am discouraged about seller fees. Thanks for the reminder.
wait. i've been wondering about this.
people who sell on their own websites [from their own dot-com] to customers in different states, do the sellers actually have to keep track of, and remit, the required amount of sales tax to each individual state?
or is that a requirement of only large businesses?
@TandemElementsShop: "... do the sellers actually have to keep track of, and remit ..." The short answer is YES. The longer answer is that every state has different rules, regulations, registration requirements, and minimums that the seller is required to abide by.
There is a nice primer on this at https://www.shopify.com/enterprise/blog/online-sales-tax-ecommerce#
There are minimums for each state that would likely never be reached by any of us -- something like $150,000 in sales to one particular state. Shopify keeps a running total, and we can check to see if we're even close to approaching any state's level. (If anyone is selling $150,000 to a state other than their own, they're probably in a financial position to pay someone to do the bookkeeping necessary to file.)
In other words, the possibility of ever needing to deal with out-of-state tax is extremely unlikely.
As far as your own state, you may need to file anyway, even if you owe $0 due to Etsy remitting the tax on your behalf.
This is not quite correct. Most states have a threshold that is let's say high with regard to the dollar amount, but ridiculously low with regard to the number of transactions, which is almost always 200. So if you sell low-cost products such as templates and earn a dollar with each download, you only need $200 to already be required to register with the appropriate tax office.
You are right -- there are states that have a minimum of 200 orders. I still think that is a pretty high amount for most shops, since that's per state.
I have Shopify Tax enabled so I can be notified if I'm getting close. There's also Tax Jar, which can be used for anyone with a high volume of orders.
@FourAcreWoodsUS wrote:I've been asking Etsy for paperwork to prove what they're doing with the tax money they collect on my behalf supposedly .
As I understand it, Etsy doesn't collect sales tax on behalf of the seller, Etsy collects sales tax because Etsy legally MUST collect sales tax. I'd be interested to learn more about this distinction, but I understand that it's important. Individual sellers are not responsible for the accuracy of sales tax collected.
@TandemElementsShopthe answer to your question is yes. The size of your business makes no difference. If you do business in most jurisdictions, you are required to collect, file sales tax returns, and remit the taxes to each jurisdiction. In some places, sales such as annual church sales, etc., are not required to do so, but there is no way our shops on Etsy would fall under those rules. If you decide to go out on your own to sell, be sure to consult your CPA regarding sales tax requirements.
To make it simple, Etsy didn't collect and remit sales tax for you. Due to Marketplace Facilitator laws, Etsy collects and remits sales tax the Etsy owes. You name is never mentioned in the filing, because you aren't the responsible party. Etsy doesn't owe you an explanation of what taxes they are required to collect and submit, so it isn't a failure on their part. Your Etsy sales are tax exempt, and should be reported as such.
Each state is different, but in my state I simply put the Etsy gross in the tax exempt section of the form.
As this topic has developed and many answers have been offered, I have seen some that are correct and some that are just very wrong. As a retired CPA, not looking for new business, but with more than 40 years of experience with businesses correcting (often very expensive) mistakes people make regarding taxes, I urge each person to consult his/her own CPA for answers, not a public forum.
@EvensensProductions When Marketplace Facilitator laws were rolled out, I asked quite a few CPAs in my area about it. Most were completely unaware of the law because most of their clients don't sell on marketplaces. Even now, years later, many CPAs will never deal with them.
Quite a few sellers have come to the forum because their CPAs aren't familiar with Marketplace Facilitator laws. One seller was quite upset since her CPA insisted she needed to file a return for each state.
Finding a tax accountant that works with small businesses is important, but sellers also need to be able to determine if their CPA actually understands e-commerce laws. Many don't.
Asking a public forum may not be perfect, but it may give the seller a place to begin, and learn what questions to ask.
@EvensensProductions I have met with plenty of CPAs and tax people who even a few years after the enactment had no clue about the markeplace faciltator and how to handle it,
I go directly to the state and not to a CPA who even today may have little clue.
In my state I an not required to report or do anything. That is from my state. Heck they don't even want me to have a vendors license since I only sell on Etsy.
Forums is still a good place to get some idea as to who to talk to next.
@bradgoodell
If I'm remembering the same poster as you are, her CPA was telling her she had to file income tax (not just sales tax) for every state. Most of us assumed she was talking about sales tax, but she confirmed that no, she was told she needed to file income tax for states where she had never lived or worked.
@Adorabilities that was the one. It's unimaginable that the CPA (and the seller did confirm she was using a CPA) would be that uneducated about state income tax.
If you can say, I'd like to know whether the sales tax Etsy collects is included in our gross sales on our Legal & Tax Info page of our Shop Manager. Do we claim this sales tax as a deduction on our taxes or do we not? I've read Etsy's comments on this and they are not clear to me.
@FallenAngelBrass We don't get the tax money, It is never part of our revenue. It is not even in the gross that Etsy publishes. The money is collected from the buyer at the point of sale for Etsy to remit as marketplace facilitator. We sellers cannot claim money we did not get for a deduction.
What some states do require is an accounting of how much a seller earned that is remitted by Etsy to that state. Not all states require this. Mine doesn't. Some states just have to checkmark that the facilitator collects while others have to give a figure.
@FallenAngelBrass: https://help.etsy.com/hc/en-us/articles/360000336447-What-Do-I-Need-to-Know-About-My-1099-K-Tax-Form... might answer your questions. The only sales tax which will be included is sales tax which has been collected and remitted to you - this is almost always because you are charging sales tax in a jurisdiction where Etsy is not required to do it themselves as a marketplace.
@FourAcreWoodsUS If you are located in a state where you have to give your state a figure for what the marketplace facilitaor collected then you will need to go through your orders for your state only. Since you don't get the money at all itis not listed on the CSV. You have to go through the individual orders or maybe the statements each month.
You do not need information for other states to give.
I've been asking Etsy for paperwork to prove what they're doing with the tax money they collect on my behalf
You do not understand
Etsy is a platform, they collect the sales tax on THEIR OWN behalf, as required by US law, and they report it against THEIR returns.
they are not collecting it on your behalf, and they do not need to inform you of their tax affaires.
.......
The Payment account monthly csv shows the sales tax collected, and remitted.
I have been too busy to work for pay for two weeks because my time is spent trying to follow the advice of a Kentucky Department of Revenue Compliance Officer who is telling me I have to report ALL SALES from buyers from anywhere in the world because I live here. She’s telling me I have to be registered and report quarterly if I TRY to earn money in the state, avoided explaining what income is not subject to sales tax suggesting even w2 employees are required to report how their income relates to sales tax. I still don’t understand this woman who won’t distinguish between the rules for online or in person sales or the difference between retail vs commission, and am drowning in penalties now for the effort. This is an absolute nightmare I thought Etsy was designed to take care of. I cannot afford the stress of this even if I could afford to try to keep making art and I have no idea how I’ll even afford to try to fix it, I have no other income. I have no idea what Etsy is even for at this point & it seems all states could decide I am responsible at any point even retroactively. Who has the time to report to every tax district in every state whether it’s zero or not while trying to earn anything to even report? There is no sanity to this situation or the idea of living in fear of the possibility. I am emotionally devastated and don’t have a straight answer or a solution to my situation.
Are you being told you need to collect and remit taxes on sales made on Etsy, or to states other than your own (outside of a marketplace)?
Who has the time to report to every tax district in every state whether it’s zero or not while trying to earn anything to even report?
I'm not sure why you think you need to do this.
@FungusGallery: You probably need to speak to a qualified accountant to know how to report your sales.
It is a seller's responsibility to know what registration requirements their state has.
Most states require that your register as a seller while others allow an exemption if you only do marketplace sales. Every state is different but in Illinois we need to report our total sales and then out of state, in state marketplace, and tax exempt sales are reported as a deduction, and we only have to remit sales tax on the difference.
Registering with each individual non resident state where you have shipped orders to generally only has to be done if you have sales that are made not on a marketplace (like Etsy) who remit the taxes for you.