VAT on Items Sold on Etsy
July 16, 2020
Probably not all Etsy sellers know that they might be responsible for VAT compliance of their sales made on the Etsy platform. When goods are sold by Etsy itself, Etsy automatically collects and remits VAT on the items that customers purchase at checkout. However, sellers need to collect and remit VAT on the items that they sell through Etsy and it is their responsibility to include the applicable VAT in their final price lists on Etsy. If buyers and sellers are located in different countries, Etsy informs buyers about the potential customs duties and import taxes on such cross-border sales.
For example, as of July 1 2018, while selling to Australian buyers from overseas, Etsy will collect a 10% GST on orders if each of the following applies:
GST is not applicable if both buyers and sellers are located in Australia or the transaction amount is more than AUD 1000.
As of December 1 2019, Etsy customers in New Zealand are subject to 15% GST on their orders if sellers are located outside New Zealand and if the package is shipped to a customer in New Zealand. However, GST is not applicable if both buyers and sellers are located in New Zealand. Furthermore, sellers must include Etsy’s Inland Revenue Department (IRD) number 122-669-181 and an indication that GST was applied on the outside of their packages and customs slip.
As of April 1 2020, Etsy customers in Norway are subject to 25% VAT on their orders if each of the following applies:
However, Import VAT is not applicable if both buyers and sellers are located in Norway or the transaction amount is more than or equal to NOK 3000 or the item is not subject to Norwegian VAT. Besides, sellers must include Etsy Ireland’s Norwegian tax (VOEC) number 2021137 and an indication that GST was applied on the outside of their packages and customs slip.
As a result, Etsy is responsible for collection and remittance of GST/VAT on behalf of the sellers in countries mentioned above. For the orders placed via PayPal, Etsy sends the collected GST/VAT to sellers and adds the tax to the Etsy statements of sellers in order to remit the tax to tax authorities.
According to new German VAT regulations, Etsy is required to collect VAT certificates from some sellers who sell to German customers. Therefore, sellers should be aware of whether they are affected by this requirement. In United Kingdom, HMRC requires businesses to register for VAT. As for most other EU-based companies, suppliers are responsible for VAT registration on the Etsy platform.
Consequently, Etsy charges VAT and remits it to authorities in countries where the law obliges Etsy to do so, however, in other countries, sellers are liable for charging and paying taxes.
Moreover, sellers are required to charge VAT on Etsy platform on digital items purchased by buyers in certain countries such as Australia, Belarus, the EU, Iceland, India, Malaysia, New Zealand, Norway, Québec (Canada), Russia, Serbia, Singapore, South Africa, South Korea, Taiwan, Turkey, Switzerland, or the United Arab Emirates regardless of their location. Thus, if the buyer is located in one of these countries, Etsy charges the appropriate VAT rate on the sale of digital items delivered via automatic download.