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Small Business
Updated 7 October 2026

Do I Need to Collect Sales Tax When Selling Handmade Products Online?

Selling your crafts online doesn't automatically exempt you from sales tax rules, and getting it wrong can mean back taxes and penalties later.

General information, not professional advice — see terms of use.

In most cases, yes. If you sell physical, handmade products to customers in states where you have "nexus" (a tax collection obligation), you generally need to register, collect, and remit sales tax on those sales. Nexus can come from where your business is physically located, where your inventory is stored, or simply from selling enough volume or dollar amount of goods to customers in a particular state, even if you have no physical presence there.

The rules changed significantly after a 2018 Supreme Court decision allowed states to require out-of-state sellers to collect sales tax based on economic activity alone, not just physical presence. This means that even a home-based crafter selling nationwide through a website or Etsy shop could owe sales tax to multiple states once sales to those states cross certain thresholds, often measured in total revenue or number of transactions per year.

The good news for many small sellers is that large marketplaces like Etsy, Amazon Handmade, and Shopify's partnered payment systems often handle marketplace facilitator sales tax automatically. Under marketplace facilitator laws, the platform itself collects and remits sales tax on your behalf for orders placed through that platform, so you may not need to register separately in every state. However, this only covers sales made through that specific marketplace. If you also sell through your own website, at craft fairs, or through other channels, you are typically responsible for collecting and remitting tax on those sales yourself.

To figure out your obligations, start with your home state, since you almost certainly have nexus there regardless of sales volume. Register with your state's department of revenue, get a sales tax permit, and determine which of your products are taxable (handmade goods are usually taxable, though some states exempt certain categories like clothing or specific craft types). From there, track your sales by state. If you are selling primarily through marketplaces that handle tax collection, your personal burden is lighter, but you should still confirm this is actually happening by checking your sales reports and marketplace tax settings.

If you sell at in-person events like farmers markets or craft fairs, you typically owe sales tax based on where the sale physically occurs, which may require a temporary seller's permit in that state or locality if it's different from your home base.

Failing to collect required sales tax doesn't mean you escape the liability. States can audit a business, and if sales tax wasn't collected from customers, the seller is often still on the hook for paying it out of pocket, plus interest and penalties. Many sellers use sales tax automation software or consult a tax professional once they cross state lines regularly or scale up sales, since the rules vary widely by state and change frequently.

If you're just starting with a few local sales, your obligation is likely limited to your home state. But growing out-of-state sales, especially through your own website or wholesale accounts, is the point where it's worth consulting a state tax authority or an accountant familiar with multi-state sales tax to make sure you're compliant before it becomes a bigger problem.

Follow-up questions

What is sales tax nexus and how do I know if I have it in a state?

Nexus is the connection between your business and a state that creates a legal obligation to collect that state's sales tax. It can be triggered by physical presence, like living there or storing inventory, or by economic activity, such as exceeding a certain dollar amount or number of transactions with customers in that state within a year.

Do I need to charge sales tax on handmade items sold at a craft fair?

Yes, in most states, in-person sales at craft fairs or markets are taxable based on the location of the event. You may need a temporary seller's permit if the event is in a state or city where you don't already have one.

Are any handmade products exempt from sales tax?

Some states exempt specific categories like certain clothing, food items, or items under a certain price, but exemptions vary widely by state. Check your specific state's department of revenue guidelines or consult a tax professional to confirm which of your products qualify.

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This page is general information, not professional advice, and it may not reflect the latest rules where you live. For your own situation, talk to a qualified adviser. Spotted an error? Email per@upperia.se and we will fix it.