Income and Self-Employment Tax
Yes – you must pay income tax on your Etsy income. In states that have income taxes, you will also have to pay state income taxes on all Etsy sales.
If you reached more than $20,000 USD in gross sales and more than 200 transactions in 2023, Etsy will have a 1099-K form available for you to use when filing for the 2023 tax year.
You will likely receive a tax form from Etsy stating the amount of income you earned for the tax year. If you earned $600.00 or more in Etsy sales, you should receive a 1099-NEC.
All income is taxable, whether you receive a 1099 or not. You may have to pay self-employment tax on the net profit from Etsy if the amount is above $400. You can deduct expenses such as shipping costs, sales tax, fees, and refunds as business expenditures when filing taxes.
Etsy sellers will file a Schedule C form to report business income and expenses. This allows deducting the cost of supplies and other shop expenses. Sellers should only report their net income, which is total sales minus expenses.
Sales Tax
Etsy sellers have to pay self-employment taxes and income taxes on what they earn. You might also have to collect sales taxes from customers and pay that out. Most Etsy shops are “sole proprietorships". The owner takes care of Etsy taxes when filing their personal return.
International Considerations
International sellers must be aware of VAT obligations for physical goods, as requirements vary. Due to the complexity of tax laws, consulting a tax professional is advised to understand specific obligations as an Etsy seller.
Getting Your 1099 from Etsy
Etsy is required to issue a 1099-K form if you had $20,000 USD in sales and 200+ transactions in 2023. Getting a 1099-K doesn’t mean you’ll owe taxes, it just reports total gross sales processed.
Etsy combines gross sales from all your shops on one 1099-K.
You likely get a tax form from Etsy stating 2023 income. With $600+ in sales, expect a 1099-NEC.
All income is taxable, with or without a 1099. You owe self-employment tax on Etsy profit above $400.