Etsy announced they are now collecting sales tax for purchases made to residents of Washington State and Pennsylvania.
This follows a similar decision by Amazon last month as both states have so-called marketplace facilitator laws on the books that require marketplaces with nexus in those states to collect sale tax.
In Amazon’s case, the nexus argument was pretty clear as the company owns warehouses in those states. But that appears to be a bit unclear with Etsy as the company has no known offices in those states unless they are considering their sellers to establish nexus.
There are couple different procedures on how this tax is collected, but Etsy will handle the collection and remittance.
However, because the PayPal method appears to include a credit and debit transaction, some sellers that use PayPal may have to make relevant adjustments to their accounting.
Here is the full information from Etsy’s website:
Sellers do not have to update their sales tax settings in their shop for orders shipped to Washington state or Pennsylvania state in the U.S. Those tax settings are used for states/regions where Etsy does not automatically collect sales tax.
Sellers cannot opt out of Etsy automatically collecting sales tax for items shipped to customers in Washington or Pennsylvania.
Note: Etsy sellers do not need to remit sales tax on their Etsy sales to a state where Etsy remits sales tax on your orders.
Purchases via Paypal
If a buyer in Washington or Pennsylvania state purchases the order via PayPal, Etsy will supply the seller with the sales tax as a part of the payment. Then Etsy will add a fee for the sales tax to your Etsy bill so that we can remit the tax to the state of Washington or Pennsylvania.
The sales tax will be included in the order information, and the fee for the sales tax will be on your Etsy itemized bill—including the relevant order number. The fee will be summed in the subcategory in your fee summary under Sales Tax Fees.
For orders shipped to customers in all other states
If you sell physical goods on Etsy and reside in the U.S. or Canada, you have the option of either including applicable taxes in your listing prices, or excluding applicable taxes from your listing prices and then using Etsy’s sales tax tool to calculate the tax owed on each sale.
What are your thoughts about marketplaces being forced to collect sales tax on behalf of sellers? Head over to our Facebook Discussion Group or use the comments section below.
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