Any costs you pay to send the customer your product are not typically included into COGS as it is not considered a direct cost of manufacture - this includes the costs of purchasing shipping via Etsy.
However, you can still claim your Etsy Shipping Labels costs as an indirect expense in the year it was incurred.
To do this, you’ll want to firstly find how much you have spent on Etsy Shipping Labels in the last tax year.
This total should then be listed in Part II of your Schedule C (see our Tips on how to complete a Schedule C for more details).
Tip: On your Schedule C, you’ll notice that there is no Postage or Shipping category, so you’ll want to either add your Etsy Shipping Label expense claim to Other Expenses or create your own Postage category on one of the available blank lines in Part II.