On Etsy, US state marketplace facilitator laws make Etsy the party that calculates, collects and remits sales tax on your orders. None of that follows you to your own store. Once orders come through your own website, registering with each state where you owe, charging tax at checkout, filing returns and paying the state become your jobs. Shopify can charge the tax once you set it up, but it does not file or pay unless you turn on its automated filing. This is the piece of marketplace facilitator tax leaving Etsy sellers most often discover late.
This guide covers US state sales tax only. It is general information about how the handoff works, not tax advice for your business. The decisions in it belong with your state’s tax agency or a tax professional who knows your situation.
Last checked: September 24, 2026. The Shopify help pages quoted below were read on that date. Tax rules and platform features change, so confirm each point on the current page before relying on it.
What the marketplace was doing for you on Etsy
Marketplace facilitator laws are state laws. They move the duty to collect and remit sales tax from the individual seller to the marketplace that processes the sale, for sales made through that marketplace. Etsy’s Help Center describes Etsy as calculating, collecting and remitting US sales tax on qualifying orders in the states where it is required to, and says sellers do not need to change their shop’s tax settings for those states. Its page titled “How US State Sales Tax and Fees Applies to Etsy Orders” lists each state and the date Etsy’s collection began there, and it is the page to check for the states you ship to.
Put plainly, a US seller whose sales have all run through Etsy may never have registered for a sales tax permit, may never have filed a sales tax return, and may never have looked up a local rate. That is not carelessness. The laws were written to put those tasks on the marketplace.
The catch is that the duty is attached to the sale, not to you. It covers orders placed through Etsy. An order placed on your own website, at a craft fair or through a wholesale invoice is not an Etsy sale, so Etsy’s collection does not reach it. The day your own checkout takes its first order, the tax on that order is outside the arrangement you have relied on.
Marketplace facilitator tax leaving Etsy: the handoff table
It helps to break “sales tax” into the separate jobs it contains, because they do not all move to the same place.
| Job | On Etsy orders | On your own store’s orders |
|---|---|---|
| Register with the state tax agency | Etsy, as the marketplace | You, in each state where you owe |
| Look up the rate for the buyer’s address | Etsy | Shopify’s tax settings, after you register and set up collection |
| Charge the tax at checkout | Etsy | Your checkout, configured by you |
| File the sales tax return | Etsy, for its marketplace sales | You, or Shopify’s automated filing if you use Shopify Tax and turn it on |
| Pay the tax to the state | Etsy | You, or the automated filing service |
| Watch each state’s threshold | Not needed for Etsy’s own collection | You, counting every channel the state counts |
| Keep records by state | Etsy’s records | You, and whoever prepares your returns |
Two rows carry most of the risk. The first is registration, which comes before collection. Shopify’s help center, in its page on navigating US tax regulations (checked on 2026-09-24), says you “must contact each of the relevant agencies and register with them before setting up tax collection in Shopify.”
The second is the money itself. Tax your checkout charges lands in your payout alongside the sale. It is not yours to keep. It is owed to the state on the state’s schedule, and a seller who has only ever seen Etsy payouts, with the tax already stripped out, can easily spend it by mistake.
Where you owe once the store is live: nexus
Whether you owe sales tax in a state depends on nexus, meaning a connection strong enough for that state to require you to collect. Shopify’s help center describes two kinds.
Physical nexus. Shopify’s page says: “Generally, physical nexus occurs when you have a physical presence in a state, such as an office, store, warehouse, or employees.” It adds that states may widen this to include solicitation of sales, fulfillment services or the presence of inventory.
For a seller who makes and ships from home, that usually points to the home state first. If you store stock with a fulfillment company in another state, that is a question to raise with a professional, because inventory can create presence where you do not live.
Economic nexus. Shopify defines it this way: “Economic nexus occurs when you exceed a certain threshold of sales to customers in a specific state.” Each state sets its own threshold and measures it its own way.
Shopify’s US tax pages link to a state-by-state reference, and each state’s department of revenue publishes the current rule. This article does not repeat thresholds because they change, and a wrong number here would be worse than none.
The running-both problem: two channels, one threshold
Very few sellers switch off Etsy on the day the store opens. Most run both for a while, which is often the sensible way to test the move, as covered in opening your own store before you leave the marketplace. Running both creates a tax question that neither platform answers for you.
Shopify’s help center puts it in one sentence: “Some states include sales in marketplaces for the purposes of determining economic nexus, while others do not.” Etsy is one of the marketplaces it names.
In practical terms, in some states your Etsy sales into that state count toward the threshold that decides whether you must register and collect on your own-store sales there. In others they do not. A store with modest direct sales could owe in a state earlier than its own numbers suggest, because the state is adding in sales Etsy already taxed.
A simple way to see where you stand is to keep two columns per state and one yes-or-no answer:
| State | Etsy sales into this state | Own-store sales into this state | Does this state count marketplace sales toward its threshold? | Total to compare with the threshold |
|---|---|---|---|---|
| (each state you ship to) | from your Etsy order records | from your Shopify reports | from the state or your tax professional | both columns if yes, own-store only if no |
The table does not decide anything by itself. Its value is that it turns a vague worry into specific questions a professional can answer quickly. It also shows which states are nowhere near a threshold, which is often most of them.
What Shopify does, and what it does not
Shopify handles more of this than a bare website would, but less than Etsy did. Its US taxes overview (checked on 2026-09-24) is direct about the limit: “Shopify doesn’t remit or file your taxes for you, unless you use Shopify Tax and set up automated filing.”
What that means in practice:
- Calculation and charging. Once you have a state registration, you add it under Settings, then Taxes and duties, then United States, and Shopify calculates and charges tax at checkout for that state.
- Shipping. For some states, Shopify’s setup page offers a setting for whether shipping is taxed. Its own advice is to leave the default in place if you are unsure and check with the state or a local tax professional.
- Filing and paying. By default, these stay with you. Shopify describes its automated filing, part of Shopify Tax, as filing “your monthly, quarterly, semi-annual, and annual US sales tax returns for you.” Eligibility, covered states and pricing sit on Shopify’s Shopify Tax pages. They change often enough that they are not repeated here.
- Responsibility. Even with automated filing, Shopify’s page says “It’s your responsibility to consult with tax authorities or tax professionals to ensure that you file and remit your taxes correctly.”
Tax handling rarely shows up in fee comparisons, yet it is part of what the marketplace’s fees were covering. When you work through what selling actually costs on Etsy versus Shopify, there is a line to add for sales tax: your own time on returns, a bookkeeper’s time, or a filing service.
A sequence to work through before the first order
The order below follows from Shopify’s own documentation. It is a way to structure the conversation with your accountant, not a substitute for it.
- List every state where you have a physical presence. Home, studio, storage unit, and any warehouse holding your stock.
- Pull your Etsy sales by state for the periods your states measure, so the running-both table has real inputs.
- Find out, state by state, whether marketplace sales count toward that state’s threshold.
- Register where you owe, before collecting. Shopify’s help center treats registration as the step that comes first.
- Enter each registration in Shopify so the checkout charges tax in those states.
- Decide who files and pays: you, a bookkeeper, or an automated service.
- Set a recurring check on your totals by state, because thresholds are crossed gradually and nobody sends a reminder.
If you are earlier than this and still deciding whether to move, the migration readiness checklist covers tax alongside the other gates, and it is a better first stop.
Questions to bring to a tax professional
Arriving with specific questions shortens the conversation and the bill. These are the ones the handoff raises:
- In my home state, do I need a permit before my first direct sale, given I have only sold through Etsy until now?
- Which of the states I ship to count my Etsy sales toward their economic nexus threshold?
- If I register in a state, will I also have to file returns that report my Etsy sales, even though Etsy paid the tax on them?
- Is shipping taxable in the states where I will collect?
- Are any of my products taxed differently, such as clothing, digital downloads or food items?
- Does storing stock with a fulfillment company create presence in that company’s state?
- What records do I need to keep, and for how long?
The answers depend on your states, your products and your volume. That is why no general article, this one included, can give them to you.
What this guide does not cover
Income tax is a separate system from sales tax and is not covered here. Nor are sales outside the US. Several other countries also make marketplaces responsible for collecting VAT or GST on certain sales, and leaving a marketplace changes those obligations as well. The rules differ by country, and a professional in that country is the right source.
FAQ
Does Etsy’s marketplace facilitator collection cover sales on my own website?
No. Marketplace facilitator laws put the duty on the marketplace for sales made through that marketplace. An order on your own website is not an Etsy order, so Etsy’s collection does not apply to it. Collecting, filing and paying on those orders falls to you.
Do I need a sales tax permit before my Shopify store takes its first order?
It depends on where you have nexus. Shopify’s help center says you must register with the relevant agencies before setting up tax collection in Shopify. For many home-based sellers, the home state is the first question. Your state’s tax agency or a tax professional can confirm what applies to you.
Will Shopify file and pay my sales tax for me?
Not by default. Shopify’s US tax overview says it does not remit or file your taxes unless you use Shopify Tax and set up automated filing. Check Shopify’s current Shopify Tax pages for eligibility and pricing.
Do my Etsy sales count toward economic nexus thresholds?
In some states they do and in others they do not. Shopify’s help center says some states include marketplace sales when determining economic nexus while others do not. Check each state you ship to with that state or a tax professional.
Can I keep selling on Etsy while my own store handles its own tax?
Yes. The two run side by side. Etsy keeps handling tax on Etsy orders in the states where it collects, and your store handles tax on its own orders. The overlap to watch is the threshold question, since some states add both channels together.