How to Collect Sale Tax on handmade items

Uncategorized Mar 30, 2021

Let’s be honest. Sales tax has gotten pretty confusing for creative business owners, especially with how much digital sales have grown. I’m sure you’ve caught yourself asking, “Do I collect sales tax? Does the sales platform collect tax for me? Why can’t I just focus on creating beautiful things?!” I agree. It sucks. But, it’s much better to handle correctly from the get-go to avoid nightmares and a long headache come next spring (AKA tax season). 

Today, I’m going to cover sales tax for online sales specifically. There are so many platforms on which you can sell your products, and unfortunately, there’s no standard for how each of them handle sales tax. So, here is my rundown of each platform and how they do sales tax!

First, let’s go over how you know whether or not to collect sales tax in the first place. The short answer is that it varies by state. 

For example, I live in Missouri, where sales tax is not required for handmade orders. So, if I were purchasing custom-made throw pillows from Pennsylvania, I would not be charged sales tax because my shipping address is in Missouri. But, if I were the seller, and my customer lived in Pennsylvania, I would adhere to Pennsylvania’s state sales tax regulations.

The sales tax is determined by the shipping address of the purchaser.


  • Easy to use, great looking virtual storefronts
  • Does not collect sales tax, nor does it provide an automated way for you to collect
    • Solution: Use a plugin or an app that will do this process for you. My personal favorite is Tax Shark; they will collect sales tax for you for every state except for the one in which you live 


  • They do collect sales tax, remit, and submit your sales tax report for you at the end of the year
  • In order for Etsy to collect the tax, you need to turn the feature on by sliding the button on your listings
  • The record of the collection of sales tax is called a CSV. You can find and download this report by following this path:
    • Shop Manager > Settings > Options > Download Data
    • Can generate reports by month or by year
  • Note: If you live in a state that requires sales tax, you may be required to include all of the Etsy sales in your state on your quarterly tax form

Personal Website:

  • Like Shopify, you will need to use an app or a plugin so that you don’t need to collect the tax manually

Now that you know some of the different ways to collect taxes, you need to make sure that you’re filing these taxes correctly. Since you are self-employed, you are required to fill out tax forms quarterly instead of at the end of the year. Here are a few 

  • When filling out your quarterly tax form, you will list the tax that you personally collect and the tax that sites collect for you on separate lines.
  • On your quarterly tax form, when filling out your the cost of the good, you only need to include your gross income. No need to add the remitted tax to the final number.
  • If you live in a state that requires sales tax, you will need to download your monthly CSVs from all platforms every single month to include on the form. 

Doing your sales taxes doesn’t have to be stressful! If you are capable of starting and running our own business, you are more than capable of filing your taxes. Have you completed the sales tax piece of filing and are ready to learn what business expenses to write off? 


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