How does Etsy handle Marketplace Facilitator Tax? (updated for 2026)
What every Etsy seller needs to know in 2026 about Etsy Marketplace Sales Taxes and how the marketplace facilitator rules affect your filing obligations.
Last updated: March 2026
Over the last decade or so, a wave of US states have passed marketplace facilitator laws — legislation designed to ensure residents pay the same sales taxes online as they would in person.
The result for Etsy sellers? In most cases, Etsy is now handling the sales tax collection for you. Here’s what that means, and — just as importantly — what it doesn’t mean.
Ready to take your Etsy store to the next level?
Discover how Craftybase is the Etsy inventory software you've been missing out on: track raw materials and product stock, COGS, pricing and much more. It's your new production central.
What is a marketplace facilitator?
A marketplace facilitator is a platform that facilitates sales between third-party sellers and buyers. Etsy, Amazon, and eBay all qualify.
Under marketplace facilitator laws, these platforms are legally required to calculate, collect, and remit sales tax directly to the relevant state authority — on your behalf. The collection is based on the marketplace’s total sales volume across all sellers, which easily clears the threshold in every state that has one.
This means you will not be responsible for collecting and remitting sales tax on orders placed through Etsy in states where Etsy has this obligation.
Which US states does Etsy collect sales tax for in 2026?
As of 2026, Etsy collects and remits sales tax in every US state that has a statewide sales tax — plus Washington D.C. and Puerto Rico. That’s 45 states and territories covered automatically.
The only places where Etsy does not automatically collect state sales tax are the five states with no statewide sales tax:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
A note on Alaska: While there’s no statewide sales tax, over 100 Alaskan municipalities have their own local sales taxes — and some now require marketplace facilitators to collect on their behalf. If you ship frequently to Alaska, it’s worth checking local requirements.
This is a big change from a few years ago, when only a handful of states had marketplace facilitator laws on the books. Since 2021, the remaining states rolled out their own legislation, and Etsy has been collecting in all taxing states ever since.
How does Etsy calculate and collect marketplace taxes?
Etsy automatically calculates the correct sales tax rate at checkout based on the buyer’s shipping address. Rates vary by state — and sometimes by county or city — but Etsy handles all of this behind the scenes. You’ll see the tax collected listed in your Etsy payment account, and it flows directly to the state authority without any action needed from you.
As an Etsy seller, keep in mind that you do not need to update your sales tax settings for orders shipped to states where Etsy collects marketplace tax. Your shop’s tax settings should only be used for states where Etsy does not automatically collect — currently just those five no-sales-tax states mentioned above.
Do I still need to file tax returns even if Etsy is collecting?
Yes — and this is the part that trips up a lot of sellers.
Even in states where Etsy collects and remits on your behalf, you may still need to file a sales tax return with that state if you’ve exceeded the economic nexus threshold. Many states require marketplace sellers to file a return even if all the tax was remitted by the marketplace — sometimes called a “zero-dollar return.”
The rules vary significantly by state. Some require returns only if you’ve registered; others automatically require filing once you exceed their threshold. This is where it’s worth talking to a tax professional if you’re selling in multiple states at volume.
Also keep in mind that your Etsy sales tax obligations are separate from your federal income tax filing. Etsy’s 1099-K reporting (now triggered at $600 in some states, $5,000 federally in 2024) is about income reporting — not sales tax. These are two different things, handled differently.
How to get a sales tax report from Etsy
Etsy provides a downloadable sales tax report from your Shop Manager. See our step-by-step guide to getting your Etsy sales tax report for the full walkthrough.
This report shows exactly how much Etsy collected and remitted on your behalf — useful both for your own records and for any state filings you may need to complete.
Frequently Asked Questions
Does Etsy collect sales tax in all 50 states?
Etsy collects and remits sales tax in all states that have a statewide sales tax — that's 45 states plus Washington D.C. and Puerto Rico. The five states with no statewide sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon) are the exception. Note that Alaska has local sales taxes in some municipalities, which may apply in certain situations.
Do I need to collect sales tax separately if Etsy is already doing it?
No — you should not charge sales tax separately on orders that Etsy is already handling. Etsy automatically calculates and collects it at checkout. If your shop's tax settings add a second layer of tax on top, buyers would be double-charged, which is a problem. Your tax settings should only apply to states or regions where Etsy is not collecting on your behalf.
Does Etsy collecting sales tax mean I don't need to file returns?
Not necessarily. Etsy remitting tax on your behalf does not always eliminate your obligation to file a sales tax return with the state. Many states require sellers to file — even a zero-dollar return — once they've met the economic nexus threshold (typically $100,000 in sales or 200 transactions). The rules vary by state, so if you're selling at volume across multiple states, get advice from a tax professional.
How do I see how much sales tax Etsy collected on my behalf?
From your Etsy Shop Manager, go to Finances → Monthly Statements or Orders → Download Data. Etsy provides a sales tax report that breaks down the tax collected per order. You can also download a CSV of your order data filtered by date range — useful for year-end bookkeeping and for any state return filings.
Does marketplace tax collected by Etsy count as my income?
No. Sales tax collected and remitted by Etsy is not your income — it passes directly to the state. It should not be included in your gross revenue on your tax return. However, depending on whether Etsy includes it in your 1099-K, you may need to account for it as a deduction or exclusion. Check with your accountant if you're unsure how it's being reported.
