Etsy is an online marketplace where people and companies may sell their handmade and antique goods. Etsy has grown to be one of the biggest online markets in the world with over 81 million active buyers. Understanding sales tax, meanwhile, is one of the most perplexing aspects of selling on Etsy. What States Does Etsy Collect Sales Tax For? and other pertinent topics will be addressed in this article. Which States’ sales taxes does Etsy collect?
In jurisdictions where online marketplaces like Etsy are mandated to collect and remit sales tax, Etsy is required to do so on behalf of sellers. The following states require Etsy to collect sales tax as of 2021: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, and South It’s vital to remember that state, county, and city sales tax rates and laws might change. If Etsy does not collect sales tax for you, it is your job as a seller to be knowledgeable about the regulations governing sales tax in your state and to gather and submit the tax on your own. Does Etsy Provide You with a W2?
No, Etsy does not provide W2 forms to merchants. Employers report the pay and taxes paid to their employees on W2 forms. As an Etsy seller, you are regarded as self-employed and are in charge of filing your own tax returns and paying your own income taxes. If you meet specific criteria, such as making over $20,000 in sales and engaging in more than 200 transactions in a calendar year, Etsy will produce a 1099-K form.
The IRS defines a hobby business as an activity you engage in primarily for leisure or enjoyment and without the goal to turn a profit. Although you cannot deduct losses from your other income if you operate a hobby business, you may still be obliged to declare your revenue and costs on your tax return. However, you might be able to write off your losses if you can show that your side hustle is an actual company with a profit-making goal.
An LLC might be more expensive to establish and operate than a single proprietorship, which is one drawback. To register an LLC with your state, you will need to pay filing fees. You may also need to pay an annual fee to keep your LLC active. In some states, LLCs must also pay a franchise tax, which is a charge for the right to conduct business there. The fact that an LLC is a separate legal entity from you, meaning you might have less control over your assets and might need to adhere to more formal company procedures, is another possible drawback.
You can go from operating as a single proprietorship to an LLC, yes. You will need to apply for a new EIN (employment identification number) from the IRS in order to achieve this, along with submitting articles of organization to your state. In order to reflect your new business structure, you will also need to change your business permits, licenses, and tax registrations. It’s crucial to keep in mind that moving to an LLC could have tax repercussions, so you should talk to a tax expert about your alternatives before making the change.
In conclusion, it can be confusing to understand sales tax on Etsy, but it’s crucial to be knowledgeable about local regulations. Etsy presently collects sales tax in 43 states and, if you satisfy specific criteria, will give you a 1099-K form. You must independently record your income and pay taxes if you are a self-employed person. Furthermore, you cannot deduct losses from your other income if you operate a hobby business even though you may still need to declare your revenue and costs on your tax return. Last but not least, converting to an LLC might have advantages and disadvantages, so it’s crucial to talk over your alternatives with a tax expert before making any changes to your company’s structure.
It relies on the LLC’s and its owners’ unique circumstances. In general, LLCs provide more freedom with regard to their taxation and the division of earnings among members. However, there are also certain tax ramifications that must be taken into account, such as state taxes and the self-employment tax. It is advised to speak with a tax expert to ascertain whether setting up an LLC is the best course of action for your particular tax position.