Sales Tax is the tax that you collect from your customers and remit to the state and local authorities where you make sales. Depending on where you live and where you sell your goods, you may have to collect and remit sales tax to different jurisdictions. You need to follow the sales tax laws and rates of each state and locality where you have a sales tax obligation.

To collect and remit sales tax for your Etsy sales, you need to do the following:

• Determine where you have sales tax nexus: Sales tax nexus is the connection between your business and a state or locality that requires you to collect and remit sales tax. You have sales tax nexus in a state or locality if you have a physical presence or an economic presence there. A physical presence can be your home, office, warehouse, store, employee, contractor, etc. An economic presence can be your sales volume, number of transactions, or other criteria that exceed a certain threshold in a state or locality. You can check with each state’s Department of Revenue or Taxation to find out their nexus rules and thresholds.
• Register for a sales tax permit: Before you can collect sales tax, you need to register for a sales tax permit in each state and locality where you have sales tax nexus. You can apply for a sales tax permit online or by mail through the relevant state’s Department of Revenue or Taxation. You will need to provide some information about your business, such as your name, address, contact details, legal structure, products, etc. You will also need to choose a filing frequency, which can be monthly, quarterly, or annually, depending on your sales volume and the state’s requirements. You will receive a sales tax permit number and instructions on how to file and pay your sales tax returns.
• Set up your sales tax rates: Once you have your sales tax permit, you need to set up your sales tax rates in your Etsy shop. You can use Etsy’s sales tax tool to calculate and collect sales tax from your buyers based on their location and the type of product you sell. You can also enter your own sales tax rates manually if you prefer. You need to set up a sales tax rate for each state and locality where you have a sales tax nexus and where Etsy does not automatically collect and remit sales tax for you. You can find here a list of states where Etsy collects and remits sales tax for you.
• Collect sales tax from your customers: When you make a sale on Etsy, you get sales tax from your customer, which depends on the sales tax rates you set up in your shop. Buyers will see the sales tax added to their order at checkout. You can see your Etsy sales tax collection under Orders & Shipping. Shop Manager > Finances > Download Data on Etsy lets you download a CSV of your sales and sales tax. You must track your sales and sales tax in each state and locality where Etsy does not automatically collect and remit sales tax.
• File and pay your sales tax returns: You must file and pay sales tax returns to each state and locality where you have sales tax nexus and Etsy does not automatically collect and remit sales tax after each filing period. You can file and pay sales tax returns online or by mail through your state’s Department of Revenue or Taxation. You must record total sales, taxable sales, exempt sales, and sales tax for each state and locality. You must pay the sales tax you obtained from customers. Downloaded CSV files of sales and sales tax from Etsy will help you prepare sales tax returns. You can automate sales tax filing and payment with software or services.