Etsy seller IRS compliance

Here are 3-5 quick compliance actions for Etsy sellers:

Here are 3-5 quick compliance actions for Etsy sellers:

Keep complete records

Maintain detailed records of gross sales, refunds, shipping, fees, COGS, and materials, and use separate business bank accounts.

Update taxpayer information

Ensure your SSN/ITIN/EIN is on file with Etsy before year-end. Shops exceeding $500 in sales without valid taxpayer details may be suspended. 3. Set aside funds for taxes: As a rule of thumb, set aside approximately 25-30% of your net income for federal and state income tax plus self-employment tax.

Understand sales tax obligations

Most states have marketplace facilitator laws where Etsy collects and remits sales tax. However, you may still need to register for sales tax permits in states where you have economic nexus, especially for off-platform sales.

Distinguish hobby vs. business

Operate your Etsy activities in a businesslike manner with a profit motive to avoid being classified as a hobby by the IRS.