Tax Compliance Solutions for Etsy Sellers 

Selling digital products or tangible goods cross-border is much easier with Etsy’s marketplace. The first step would be to open an account and register your e-shop on Etsy. Then you are good to go, right? However, it’s not that simple. Etsy will handle the part of your VAT compliance obligations; the rest is entirely your responsibility. Our tax team has developed a specific marketplace VAT compliance consulting scheme for Etsy suppliers. 

In many jurisdictions, Etsy will operate as a deemed supplier, and it will charge, collect, and remit VAT; however, this accountability isn’t applicable by default for cross-border. In numerous jurisdictions, the underlying supplier (that is, a natural or legal person) that pursues economic activity shall be accountable for tax compliance.

If you understand the VAT rules Etsy applies, you could grow your business with less stress, fewer chances of being fined by different tax authorities, and most importantly, you can raise your income numbers while maintaining cross-border tax compliance. 

Why VAT Compliance Matters for Etsy Sellers

Etsy, as the marketplace operator, takes responsibility for charging, collecting, and remitting VAT, GST, and sales tax on behalf of suppliers in different countries. Etsy (as deemed supplier) acts as a supplier for sales of digital products or physical products (tangible goods) when the buyer is based in one of the countries on Etsy’s list. 

The list is updated periodically in accordance with local and international taxability rules and requirements. 

On the contrary, in countries where Etsy doesn’t operate as a deemed supplier, the underlying supplier of tangible goods or digital products is responsible for full VAT compliance. In these scenarios (which are many), the supplier is responsible for charging, collecting, and remitting VAT to the respective tax authorities. 

Non-compliant Etsy sellers may be suspended from selling via the marketplace, have their accounts temporarily suspended, or have payments blocked during an internal or tax audit. 

It’s critical for each Etsy seller to understand their tax responsibilities. On one side, to be mindful of the scope of the VAT responsibilities towards the Etsy Marketplace, and on the other, to be fully aware of the VAT duties in each country where it has customers. 

VAT Registration for Etsy Sellers 

In cases where Etsy, as an e-marketplace operator, isn’t acting as a deemed supplier, the supplier is obliged to register for VAT to charge, collect, and remit the tax payable to the respective revenue office. 

In each jurisdiction where Etsy hasn’t acted as a deemed supplier, the supplier should register for VAT when the mandatory registration threshold is reached. 

The supplier should be familiar with Etsy’s internal VAT policies, as well as the tax rules and regulations in each jurisdiction where it has customers. 

An Etsy seller could be responsible for registering for VAT additionally in the following cases: 

• When it’s based in the EU, UK, Norway, or Switzerland, and the threshold is reached. This gross income refers to sales that are facilitated by Etsy. If the supplier has additional sales channels(direct or via other marketplaces), the threshold could be reached sooner. 
• When it has reached the domestic threshold(domestic being the country indicated on the platform as “place of business” of his e-shop/shops) 
• In destination countries where Etsy, as a platform, isn’t collecting and remitting VAT 
• In destination countries where Etsy collects and charges VAT on underlying supplies, local rules require marketplace sellers to register for VAT when the threshold is reached. 
• When a supplier chooses voluntarily to be VAT registered to claim input tax credits 

VAT Challenges for Etsy Sellers 

Operating a registered Etsy shop or shops and making cross-border sales directly requires that the supplier (being a natural or legal person) be aware of its VAT responsibilities. Some of the critical challenges that each Etsy seller faces when making cross-border supplies are the following: 

• Familiarity with VAT registration threshold in multiple countries where it has customers 
• Proper VAT calculation 
• Different tax rules for selling tangible goods and digital goods 
• Continuous monitoring of VAT changes(taxability rules, threshold changes, VAT rates) 

How to Stay Compliant

Since the launch of the Etsy marketplace, we have been providing Etsy VAT compliance services to e-commerce businesses and digital sellers, regardless of their place of business or residence. We will provide you with assistance with Etsy VAT registration in all jurisdictions where your business needs to be registered. 

These are customized 1stopVAT compliance services that most of the Etsy sellers ask for: 

• VAT consulting for Etsy sellers 
• Cross-border VAT solutions for Etsy shops
• VAT registration assistance 
• VAT/GST/Sales Tax Calculations 
• VAT return filing and remittance 
• Integrations with accounting platforms 
• Continuous Support 

Takeaway

Frequently Asked Questions