Do I Need a Tax ID to Sell on Etsy?
If you’re planning to sell on Etsy, you may need to register for a tax ID. Generally, sales tax registration is required when a seller has either economic nexus or a physical presence in the state.
Etsy does not need to use your social to deposit funds into your account. They only need the routing number and account number.
Tax Requirements for Etsy Sellers
If you’re not employed or self-employed but you sell on Etsy – so it’s just a hobby – you generally won’t need to pay tax on your income. You can earn up to £12,570 tax-free because of the Personal Allowance.
Regarding you question, how much can you sell before paying tax on your earnings, as a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly.
Business Licensing and Tax Obligations
Any business selling taxable items will need to register for a sales tax permit in order to legally sell and collect sales taxes.
As an Etsy seller, if you earn $400 or more, you will be responsible to pay self-employment tax (Social Security and Medicare) as well as income tax. Self-employment tax equals about 15.3% of your net earnings.
Selling on Etsy Without a Business License
Etsy’s seller policies do not require you to have a business license to sell on their platform. Your Etsy shop is either a business or a hobby.
Need for a Tax ID on Etsy
A Tax ID, also known as an Employer Identification Number (EIN), is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify a business entity. Etsy’s required to report tax information to local tax authorities in certain countries when sellers make more than the VAT threshold in sales on Etsy each year.
If you’re not employed or self-employed but you sell on Etsy – so it’s just a hobby – you generally won’t need to pay tax on your income. You can earn up to £12,570 tax-free because of the Personal Allowance. Sales tax is based on shipping location. For instance, if you’re in California and you set a tax rate for California, a buyer in New York wouldn’t be charged tax.
Tax Reporting and Licensing Requirements
Etsy, like other marketplaces, is required by US law to send out a 1099-K tax form reporting the total gross sales income you received through Etsy Payments during the last calendar year.
Conclusion
Beginning in January 2022, anyone who sells more than $600 worth of goods through Etsy will receive a 1099-K form, detailing the transactions for the IRS.