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How does Etsy handle Marketplace Facilitator Tax? (updated for 2025)

What every Etsy seller needs to know in 2025 about Etsy Marketplace Sales Taxes.

How does Etsy handle Marketplace Facilitator Tax? (updated for 2025)

Over the last five years or so, a number of US states have introduced a bewildering array of new laws in an attempt to increase their share of taxes on online purchases (otherwise known as “distance sales”).

These laws are designed to ensure that residents of these states pay the same sales taxes as if they purchased the product in person.

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As part of this legislation, marketplaces like Etsy and Amazon are legally required to calculate, collect and remit sales tax directly to the state authority on behalf of the seller.

This collection is performed regardless of the number of sales or revenue you make: it is the marketplace’s total revenue and sales that are counted in the eyes of the IRS.

As Etsy and Amazon’s total sales well exceed the thresholds of all states you will find that sales made via these marketplaces will all be taxed automatically, no matter how many sales you yourself make.

This means that you will not be responsible for collecting and remitting tax from marketplaces that are already doing this on your behalf.

However, you will still need to be aware of the fact that you may need to calculate and file returns for all states in which you have made sales, including “marketplace facilitator” states that are collecting your taxes directly. (see our blog post State Taxes: A Handmade Sellers Guide for more details)

Which US states does Etsy collect sales tax for?

As of 2022, Etsy calculates, collects, and remits sales tax for orders shipped to customers in the following states:

  • Alabama
  • Arkansas
  • Connecticut
  • District of Columbia
  • Kentucky
  • Idaho
  • Iowa
  • Indiana
  • Nebraska
  • New Jersey
  • New Mexico
  • New York
  • Minnesota
  • Oklahoma
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Vermont
  • Virginia
  • West Virginia
  • Wyoming
  • Washington
  • Hawaii
  • Illinois
  • Michigan
  • North Carolina
  • Georgia
  • Louisiana
  • Mississippi
  • Tennessee
  • Puerto Rico
  • Florida
  • Kansas

How do I calculate my Etsy marketplace taxes?

Marketplaces that are required to collect sales tax on your behalf (i.e. Etsy, eBay and Amazon) will charge the customer the correct amount and then send the tax to the relevant authority for you so you will not need to remit this yourself.

As an Etsy seller, it’s important to note that you do NOT have to update your sales tax settings in your shop for orders shipped to the states that Etsy collects marketplace tax for.

Your tax settings should only be used for states/regions where Etsy does not automatically collect sales tax.

You will still however need remember that you need to calculate the total tax per state and lodge a return if you pass the individual thresholds.

Nicole Pascoe Nicole Pascoe - Profile

Written by Nicole Pascoe

Nicole is the co-founder of Craftybase, inventory and manufacturing software designed for small manufacturers. She has been working with, and writing articles for, small manufacturing businesses for the last 12 years. Her passion is to help makers to become more successful with their online endeavors by empowering them with the knowledge they need to take their business to the next level.
etsy tax marketplace taxes facilitator tax