Selling on Etsy and taxes: All you have to know

Etsy, the American e-commerce online platform was founded in 2005 and since then has established itself on the German market. Today, it's probably the largest online marketplace for designers, artists and collectors. Due to particular specifications and a unique target group, Etsy is an ideal platform for many creative self-employed people to sell their craft or products. Are you thinking about selling on the Etsy marketplace? Here's what you should keep in mind.

Income via Etsy: Do I have to be self-employed?

It's possible to sell on Etsy as a private seller. However, if you sell on the platform with an intention of regular profit, it counts as self-employed activity. This means that you have to register your self-employment with the Finanzamt. Most likely, you will need to register as Gewerbetreibender (tradesperson) but it depends on the type of goods or services you sell. ➡️ Here you can read all about the difference between Gewerbe and Freelance. 💡Tip from Accountable: Use Accountable to stay in control of your bookkeeping and especially your tax obligations as a self-employed person, right from the beginning. We also have a special tax calculator for self-employed professionals: you can find out in less than 2 minutes how much you would earn net when you start a business as Gewerbetreibender and how much tax you would pay. 

Selling on Etsy: What you need to know

Unlike other digital marketplaces such as Ebay or Amazon Marketplace, only very specific items may be offered on Etsy. The following guidelines apply:

• handmade products – items made and/or designed by the seller themselves
• vintage-items – are at least 20 years old and must be originals 
• creative supplies (material & tools) – e.g. components, ingredients, or materials used in making a product or creating a special occasion.

On the platform you can not only sell your own products, but Etsy also helps you to open your own online business and even supports you in the first steps into self-employment. To do this, you must first register as a member of Etsy to open your own virtual store. The Etsy menu will guide you through all the steps and help you with the necessary settings. Opening an Etsy account is free of charge. 💡Tip from Accountable: Maybe selling on Etsy is your first step into self-employment. This is what you need to know about starting a side hustle. 

Taxes for selling on Etsy 

The first tax that is relevant to you is VAT (value added tax). Later on, there also will be income tax and trade tax, (if you registered a Gewerbe).

Value added tax (VAT)

You only need to charge and pay VAT when your revenue will be over 22.000 Euro in your first year and over 50.000 Euro in the second year. If this is not the case, you could make use of the so called Kleinunternehmerregelung. Also, you don't need to submit a regular VAT return to the Finanzamt. This also means that you don't have to include VAT on your invoices and can sell to the end customer at the "net price". For private individuals who buy your goods it's an advantage, while it is not relevant for commercial buyers, since these clients can claim the VAT from the Finanzamt.  💡Tipp von Accountable: Should you make use of the Kleinunternehmerregelung? We have an overview for you here.  

Trade tax (Gewerbesteuer)  

The name already gives it away: the Gewerbesteuer only applies to Gewerbetreibende, but not to freelancers. It is only due when you have an annual profit of 24,500 Euro and above. The deadline for the Gewerbesteuer is the same as for the income tax, (usually the 31th of July in the following year).

Income tax

The income tax is your personal tax return. Here, all your income from your jobs as an employee, your self-employment activity and other sources of income (e.g. rental income) is taken into account. Therefore, it is recommended to set up your own business bank account right at the beginning of your activity on Etsy and to separate private and business income and expenses. 💡Tip from Accountable: Just connect your business bank account with the Accountable App and you'll see how much money you need to set aside for taxes in real time!

How much are the Etsy fees? 

Of course, also Etsy is not completely free of charge. Some fees apply if you want to actively sell products. In addition, there is the possibility to open an Etsy Plus account, which offers you additional support. Also, with a Plus package, you receive a monthly bonus credit of 4.20 Euro for posting items. The Plus package is offered in the form of a subscription and can be added after opening the account as a "basic member". The used currency at Etsy is the USD, so the fees mentioned may vary slightly depending on the dollar exchange rate. These fees apply on Etsy:

• Listing fees – 0,20 USD per item (the item stays in the store for 4 months or until it is sold.)
• Transaction fees – 6.5% is charged on the sale price.
• Payment processing fees – for payments via Etsy Payments there are an additional 4% plus 0,30 Euro charged. In addition to the user-friendly and secure direct payment and PayPal, it's also possible to pay via credit and debit card, Google Wallet, Apple Pay and Etsy vouchers. Your revenues will then be transferred to your bank account in Euro.

Is Etsy the right choice for me? 

Etsy offers an easy way to start your own online store and helps you with numerous tools to become successful with your business online. It takes care of many things for you and offers a variety of statistics to better analyze your business. And last but not least, Etsy also offers a good seller protection, which helps you in case of disputes with buyers. Furthermore, Etsy does a lot to make the platform bigger and bigger and undertakes some marketing activities to be present in the relevant social networks. The sellers are regularly offered training opportunities to successfully build a store. Etsy can therefore be a suitable platform for you if you are just starting your self-employment or an alternative to the platforms you are currently using to sell your products. For everything else concerning your life as a self-employed online seller, there is Accountable!