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All you need To Know About VAT on ETSY

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Ever since its launch in 2005, Etsy has become the world’s biggest and best-selling platform for artists, handicrafts, vintage items, and crafting supplies.

With more than 5 million active sellers and 90 million buyers worldwide, and still growing, Etsy has proven itself to be one of the most trusted selling platforms in the world today.

And one of the reasons for their success is their straightforward compliance with both local and international trade laws, especially regarding VAT.

What is VAT?

Value Added-Tax or VAT is a tax based on the consumption of goods, services, products. Many countries in the world today have begun adapting VAT or a similar concept to their trade policies.

As such, if you are a seller on ETSY, you must know how VAT is applied on ETSY to avoid confusion on ETYS’s seller fees.

In this article, we will help you understand how VAT works on ETSY, as well as give you tips on how to properly manage and update the books of your business.

We at eComLedger we have worked with Your Ecommerce Accountant to develop software which connects and then exports an accountant friendly report ready to post in your accounting systems. This has all the VAT dealt with and can be reconciled the cash.

How is VAT charged on ETSY Seller fees?

VAT is treated differently depending on the status of your business on ETSY and its’ location.

  1. VAT – registered and based in the UK, European Union (except Ireland)

If you are VAT registered and have submitted your VAT ID on Etsy, you will not be charged with VAT as ETSY will treat you as a “business entity”. Your monthly invoice will state that your Sellers fees were not charged with VAT.

  • Not VAT-registered and based in the UK, European Union (except Ireland)

If you are not VAT-registered and have not submitted a VAT ID on ETSY’s platform, you will be treated as a “consumer” which will result in ETSY applying VAT charges on your seller fees.

On your monthly invoice, you will be able to see the VAT charges applied on your seller fees which are based on Listing, Payment processing fees, etc.

  • Based on Ireland, regardless of VAT-registered or Not

In this case, your seller fees will automatically be charged with VAT as per regulations of the country.

On your monthly invoice, you will be able to see the VAT charges applied on your seller fees which are based on Listing fees, Payment processing fees, and other fees.

How do I add my VAT ID on ETSY?

If you are VAT-registered, you can easily add or update your VAT ID on ETSY by following these steps;

  1. Click Shop Manager on the platform of ETSY.
  2. Select Finances
  3. Select VAT ID
  4. Key in your VAT ID
  5. Select Submit and you’re done.

If you encounter some issues regarding your VAT ID, then you might want to visit the European Commission to verify your VAT ID’s format or visit the local tax office of your country.

Collecting Sales UK VAT on Etsy

If you or your client are a UK seller then Etsy will not collect VAT on UK to UK supplies. However, if your client is outside the UK then Etsy will collect VAT on your behalf.

This is from Etsy’s website. As of 1st January 2021, Etsy collects VAT from buyers on orders that meet the following criteria:

  • The buyer is located in the UK.*
  • The goods are dispatched from outside the UK.
  • The total value of the package (excluding delivery) is less than or equal to 135 GBP.

In reality, we have found that Etsy show they have collected VAT from UK to UK sales and remitted it on the sellers behalf. This may be presentational and have raised a case with Etsy. We will update you with any update.

Therefore, you need to be extremely careful when looking at Etsy reports to ensure that you are not double counting VAT.

Contact us with any specific scenarios and we can see if we can help.

UK sellers, selling in Europe will also come under the marketplace rules and Etsy will collect and remit taxes on their behalf as long as its below 150 EUR. Otherwise you will have to collect VAT yourself.

Can I still sell on ETSY even if I don’t have a VAT ID?

You can continue using and selling your items on ETSY even if you don’t have a VAT-ID. However, depending on your country’s sales thresholds, you will be required to register for a VAT ID.

Check on your country’s tax authority for these thresholds as ETSY might restrict you from using their platform once they notice that you have exceeded your country’s sales threshold as a non-VAT registered business.

How do I check for the VAT-related fees on ETSY?

ETSY provides downloadable versions of your monthly invoices where you can check and verify the breakdown of VAT charges on Etsy seller fees. You can access and download your monthly invoice by following the steps;

  1. Go to Shop Manager on your ETSY account.
  2. Then Finances
  3. Go to the Payment account
  4. Select the month of the invoice that you want to check
  5. Download

If you want to know more about VAT on Etsy and other fees that can affect your business on ETSY, we at eComLedger are always ready to answer every question you have. We have qualified accountants on board that can help you understand and help you manage your business properly.

Ben Sztejka ACA

Ben Sztejka ACA

I am an ICAEW Chartered Accountant and owner of Your Ecommere Accountant. I created eComLedger to give other accountants access to accountant focused software for UK eCommerce clients.

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