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By Wunderlabel on 10/25/2021

Opening an Etsy Shop

Opening an Etsy Shop: What You Need to Know

As with any other online shop, you need to follow certain guidelines when opening an Etsy Shop.This blog post explains in detail which requirements you have to fulfil in order to open an Etsy shop. Etsy is a marketplace for everyone who likes handmade goods. Both selling and buying is made very easy on this online platform. Etsy is becoming more and more popular because of the unique and homemade products on offer.  Personalization plays a big role in this. Customizable products from Wunderlabel will add more value to your items and make them truly unique. If you want to start selling your handmade products then you should definitely open an Etsy shop. We have put together a few tips to help you get started. We hope that this blog post will help answer some of your questions.

What do I need to know before selling items on Etsy?

Creating a business and selling items on Etsy means that you will have to report your earnings and pay taxes on that income. There is also a high possibility that you will need to pay self-employment tax as well. Keep in mind that in some locations you will be responsible for collecting sales tax. You may also need a business license depending on your location and the types of items you sell.

Do I need a business license to sell on Etsy?

A quick search on Etsy will show that they do not require a business license to sell on their platform, but that doesn’t mean you don’t need one. Needing a business license or not depends on where you live. It also depends on what type of items you’re selling and how much you’re selling. A lot of states don’t require a business license unless your sales hit a certain threshold. It is best for you to check with the local authorities in your county or jurisdiction to confirm if you need a business license or not.

Do I have to pay federal and state taxes on my Etsy income?

Selling items on Etsy and making a profit means that you will need to claim this income on your federal and state income tax forms. Of course you are able to deduct business expenses from this income. A few examples of deductions that you can deduct from your business expenses are: marketing items, supplies for shipping and also office supplies like labels and toner cartridges. 

Etsy will report your gross income to the Internal Revenue Service (IRS) on a 1099-K form. You will receive a copy of this form from Etsy. In the event that you don’t receive a copy, you still need to report your earnings on your tax return. If the particular state you live in has a state income tax, you’ll need to pay state income taxes on your Etsy income as well. Check with your official state website to obtain the correct forms and information regarding state income taxes.

What is a hobby business?

If the IRS considers your Etsy business to be a hobby business, you are not allowed to deduct business loss expenses from your income. To avoid being classified as a hobby business, treat your Etsy business like a serious business. Keep complete records of your sales and you must make a profit 3 out of 5 years that you are operating. Being considered a hobby business does not mean you do not have to pay federal or state income tax. It only means that you may not deduct your business expenses.

How can I calculate, charge and collect sales tax for my Etsy business?

Depending on where you live, you’ll need to calculate and collect state tax on your items sold. Most often it’s a percentage of the total of each of your sales. Sales tax laws vary greatly from state to state and county to county. It is best for you to contact local authorities to gather the specific information for your area. You can start on the IRS website for State Government Websites for Small Businesses and Self Employed.

Will I need to pay self-employment tax for my Etsy business?

Self-employment tax is a combination of Social Security and Medicare taxes. The self-employment tax which needs to be paid for your Etsy business is the percentage you would have normally paid as an employee plus the percentage which was paid by your employer. If your net income from Etsy is $400 or more, you will need to pay the self-employment tax. You can read more about self-employment tax on the IRS website.

If you want to find out more about the other costs you will incur when opening an Etsy store please read our blog post "What is Etsy".

After you have sorted out the legal and tax requirements, don’t forget to add a personal touch to your packages with a personalized sticker from Wunderlabel to make your product truly unforgettable!

Tips for a successful launch on Etsy

Before you start selling your products and opening your Etsy shop, think about how to best promote it to draw attention to your items. Your goal should always be to stand out with unique ideas. You can showcase your Etsy products perfectly with personalized Wunderlabel products. Why not add a personalized ribbon to your gift boxes?

Or use self-designed hang tags with a logo or even QR code to give a special touch to your products. There are numerous design options to be found in our shop with an interactive preview. Try them out in our online hang tag configurator
If you sell clothing then our custom labels will get you noticed and impress potential customers. 

Add personalized finishes to your products to increase sales and open your Etsy shop. Start selling today!

Don't miss these blog posts from Wunderlabel:

What is Etsy? 

5 Reasons to Choose Etsy

What is Etsy Plus?

Is it Worth Selling on Etsy?

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