Etsy Collects It. So Why Does Your State Want a Return?
Most new online sellers hear the same thing: “Don’t worry about sales tax, Etsy handles it.” On Etsy itself, that’s mostly true. But the moment you open your own store, sell a shirt at a craft fair, or take a bulk order from a local team, the job lands back on you. And some states expect a permit and a tax return from you even when a marketplace already paid every cent.
Sales tax isn’t hard once you see how it works. It’s just easy to get wrong by assuming someone else is doing it. Here’s what online sellers actually owe in 2026, who collects what, and the few rules that catch small sellers off guard.
Short version: Marketplaces like Etsy and Amazon collect and pay sales tax on your sales there. On your own store, at craft fairs, and on local orders, you collect it yourself, which usually means getting a sales tax permit in your home state before you start. Other states generally don’t require you to collect until your sales into them pass a threshold, most often $100,000 a year, or $500,000 in California, Texas, and New York. Some states count your marketplace sales toward that threshold, and some want returns even when the marketplace paid the tax. Give your print company a resale certificate so you don’t pay tax twice.
Sales Tax in One Minute
Sales tax is paid by the buyer, but collected by the seller, who sends it to the state. You only have to collect it in states where you have nexus, meaning enough connection to the state for it to require you to collect. There are two kinds:
- Physical nexus: you live there, work from there, store inventory there, or sell in person there, even for a weekend at a craft fair.
- Economic nexus: your sales into a state pass its threshold, even if you’ve never set foot there. States have been allowed to require this since the Supreme Court’s 2018 Wayfair decision.
Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax. Alaska has none statewide, but many Alaska towns charge their own.
Who Collects: It Depends Where You Sell
| Where you sell | Who collects the sales tax | What you still need to do |
|---|---|---|
| Etsy, Amazon, eBay, and similar marketplaces | The marketplace | Check whether your home state still wants a permit and returns |
| Royalty sites like Redbubble, TeePublic, and Amazon Merch on Demand | The platform, which is the seller of record | Usually nothing for sales tax; report your royalties as income |
| Your own Shopify or website store | You | Get a home-state permit, turn on tax at checkout, file returns |
| Craft fairs and markets | You | Have a permit for the state where the event is |
| Local bulk orders | You | Charge tax unless the buyer gives you an exemption certificate |
Every state with a sales tax now has a marketplace facilitator law, which makes the marketplace responsible for collecting tax on the sales it handles. That’s why you don’t add sales tax to your Etsy listings yourself. Doing so would charge your buyers twice.
Your Home State Comes First
Living and working in a state gives you physical nexus there automatically. So if you sell anything yourself, through your own store, at events, or locally, you need a sales tax permit from your home state, usually before your first sale. Registration is free or cheap in most states and done online through the state’s tax department.
Timing matters in some states. New York, for example, requires you to register at least 20 days before you start doing business, and you can’t legally make taxable sales until you have your Certificate of Authority. Vendors at craft shows and flea markets there need a regular certificate, even if they only sell occasionally.
The part Etsy-only sellers miss: some states require in-state sellers to hold a permit and file returns even when every sale went through a marketplace that already paid the tax. Those returns often show zero tax due, but missing them can still bring notices and penalties. Texas is one state where this comes up. Check your own state’s rules once, when you start, and again if your sales grow.
When Other States Come Into Play
For your own store, you only start collecting in another state once your sales into that state pass its economic nexus threshold. As of late 2026:
- Most states: $100,000 in sales into the state per year
- Some states also use a 200-transaction test, including New Jersey, Ohio, Michigan, Georgia, and Virginia, though many states have dropped it. Kentucky dropped its transaction test in August 2026
- Alabama and Mississippi: $250,000
- California and Texas: $500,000
- New York: $500,000 and more than 100 sales
The catch: marketplace sales can count. In many states, including California, Texas, New York, New Jersey, and Ohio, your Etsy and Amazon sales count toward the threshold even though the marketplace collected the tax. Other states, including Florida, Arizona, Colorado, and Massachusetts, leave them out. For a small shop this rarely matters, since $100,000 in sales into one state is a lot of shirts. But if your business grows, track your sales by state, all channels combined. Thresholds change often, so confirm with the state before you rely on these numbers.
Clothing Gets Special Treatment in Some States
If you sell shirts, this one helps you. A handful of states don’t tax most clothing at all, and a few exempt it up to a price:
- No sales tax on most clothing: Minnesota, New Jersey, Pennsylvania, and Vermont
- Exempt up to a price: Massachusetts up to $175 per item, New York up to $110 per item from the state tax (local rules vary), and Rhode Island up to $250
Accessories like hats, bags, and jewelry often don’t qualify. Etsy and Shopify Tax apply these rules automatically when they calculate tax at checkout. Where it matters most is in person: if you sell at events in one of these states, find out what counts as exempt clothing before you start charging tax on t-shirts.
Don’t Pay Tax on What You Resell: Resale Certificates
Sales tax is meant to be paid once, by the final buyer. But print companies may charge you sales tax on the shirts they print for you. Printful and Printify both charge sales tax on orders shipped to states where they’re registered, unless you’ve given them a valid resale certificate.
A resale certificate is a form, usually from your state tax department, that says you’re buying the item to resell it. Once you have a sales tax permit, you can submit one to your print company and to suppliers of blank shirts and transfers. The rules for which states accept which certificates vary, so check each print company’s help center for the forms they accept. Without one, you’re paying tax on the shirt, and your customer may pay tax on it again.
Craft Fairs and Local Orders
- Selling at an event creates nexus in that state, even for one weekend. For an event in your home state, your regular permit covers you. For an out-of-state event, look up that state’s rules for temporary vendors before you go. Many event organizers ask for your permit number.
- Charge tax at the rate for the event’s location. Card readers like Square can add the right rate at checkout.
- Some bulk buyers are exempt. Schools, many nonprofits, and government agencies may not pay sales tax, but only with a valid exemption certificate. Get a copy before the order and keep it with your records. Without it, you could owe the tax yourself.
Tools That Help, and What They Don’t Do
Shopify Tax calculates the right tax at checkout, including clothing exemptions. It’s free until your store reaches $100,000 in sales, then costs 0.35% per US order on the Basic, Grow, and Advanced plans, capped at $0.99 an order. For stores opened on or after May 13, 2026, that $100,000 is a lifetime limit rather than a yearly one.
Collecting isn’t filing. Shopify calculates and collects the tax, but it doesn’t send it to the state for you, and its automated filing service is closed to new enrollment as of October 2026. You file returns yourself on your state’s tax website, or pay a filing service or bookkeeper to do it. Most small sellers file quarterly or yearly, and the state tells you which when you register.
Set the tax money aside. Sales tax you collect isn’t your money. Move it out of your business account, or at least track it separately, so it’s there when the return is due. Business banking and bookkeeping covers setting up accounts that make this easy.
Mistakes That Cost Small Sellers Money
- Opening your own store or selling at an event without a permit, then owing the uncollected tax out of your own pocket.
- Adding sales tax to Etsy prices, which charges buyers twice.
- Missing zero returns your state requires, which can bring penalties even when no tax was due.
- Paying tax to your print company on every order because you never sent a resale certificate.
- Spending collected sales tax as if it were profit.
Your Sales Tax Checklist
- Selling only on Etsy or Amazon? Check whether your home state still wants a permit and returns.
- Before your first own-store, event, or local sale, register for a sales tax permit in your home state.
- Turn on tax collection at checkout, and check how your state treats clothing.
- Send a resale certificate to your print company and blank suppliers.
- Track own-store and in-person sales by state. The Sales Tax tab in our print on demand workbook does this.
- File every return on time, including zero returns.
- Once a year, check your sales by state against the thresholds.
Ten Minutes Now Saves a Letter From the State Later
For most small online sellers, sales tax comes down to one permit, one setting at checkout, one certificate for your print company, and a return a few times a year. The sellers who get in trouble aren’t the ones who did it wrong. They’re the ones who assumed it was handled. If you’re building a shirt business, the print on demand business blueprint shows where sales tax fits among the other setup steps, and licenses, permits, and certifications covers the other paperwork a small business needs.
Related Guides
- Print on demand business blueprint: the full step-by-step plan.
- Print on demand trademark rules: what not to put on a shirt.
- How to make money on Etsy: fees, rules, and what sellers earn.
- The 1099 tax reality: the income tax side of selling online.
This article is for general informational purposes only and isn’t financial, legal, insurance, or tax advice. For guidance specific to your situation, talk to a licensed professional.
Frequently Asked Questions
No. Etsy collects and pays sales tax on your Etsy sales under marketplace facilitator laws. But some states still require in-state sellers to hold a permit and file returns, often showing zero tax due, so check your home state’s rules.
Usually yes, in your home state, before you start selling. On your own store you’re the seller, so collecting sales tax is your job. Other states generally require you to register only after your sales into them pass their threshold, most often $100,000 a year.
Most states use $100,000 in sales into the state per year, and some also use a 200-transaction test. Alabama and Mississippi use $250,000, California and Texas use $500,000, and New York uses $500,000 plus more than 100 sales. Many states count marketplace sales toward the threshold.
No. Minnesota, New Jersey, Pennsylvania, and Vermont don’t tax most clothing. Massachusetts exempts clothing up to $175 per item, New York up to $110 from the state tax, and Rhode Island up to $250. Accessories often don’t qualify.
Both charge sales tax on orders shipped to states where they’re registered, unless you’ve given them a valid resale certificate. Once you have a sales tax permit, submitting a resale certificate stops the charge on products you’re reselling.
Yes, in most states. Selling at an event gives you nexus in that state, so you need a permit there and should charge the tax rate for the event’s location. Some states, like New York, require a regular sales tax certificate even for occasional show vendors.
Sources
- Kintsugi, Economic nexus by state (updated September 2026): https://trykintsugi.com/sales-tax-guides/usa/economic-nexus
- Avalara, States eliminating economic nexus transaction thresholds (2026): https://www.avalara.com/us/en/blog/2025/06/states-eliminating-economic-nexus-transaction-thresholds.html
- Zamp, Does Etsy collect sales tax for sellers? (2026): https://zamp.com/blog/etsy-collect-sales-tax-sellers
- New York State Department of Taxation and Finance, How to register for sales tax: https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/how_to_register_for_nys_sales_tax.htm
- Tax Foundation, State sales taxes and clothing exemptions: https://taxfoundation.org/map-state-sales-taxes-and-clothing-exemptions
- Printful, Does sales tax apply to me?: https://support.printful.com/hc/en-us/articles/41396654298769
- Printify, Does sales tax apply to me?: https://help.printify.com/hc/en-us/articles/4483601178897
- eSEOspace, Shopify Tax pricing (October 2026): https://eseospace.com/blog/shopify-tax/