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.