Should artists collect sales taxes at arts and crafts shows?
If you’re planning to sell merchandise at the Spiritual Fusions Psychic & Holistic Extravaganza in Columbia, South Carolina, you can probably foresee that you’ll need to obtain a retail license from the South Carolina Department of Revenue and collect and remit all applicable sales and use taxes.
But what if you’re selling local art at the Longview, Washington, Squirrel Fest, or “vintage upcycled items” at the Sheyenne Valley Arts & Crafts Association’s annual Junk, Vintage & Craft Fest in Fort Ransom, North Dakota?
In both of those cases, you’ll need to register with state tax authorities.
Online marketplaces for artists and crafters
For some artists, selling at craft shows, fairs, and community festivals is part of what corporate retailers would call an “omnichannel marketing strategy.” Those vendors are selling their wares to in-person shoppers at fairs or events at their own studios, while also selling through their own websites and through online marketplaces. Using different channels gives artists and crafters more opportunities to put their work in front of different audiences. However, each of these marketing channels has its own particular set of sales tax compliance challenges.
When we talk about online marketplaces in the arts and crafts space, we’re of course talking about Etsy. There are more than 5.3 million active sellers on Etsy, the largest platform for arts and crafts. Sellers on Etsy made nearly $13.5 billion in sales in 2021.
But Etsy is far from the only online marketplace for artists and crafters. Competitors include Amazon Handmade, Shopify, Wix, and a host of other niche marketplace sites.
Career websites say artists and craftspeople who sell through online marketplaces can make up to $50,000 a year, but that can vary widely. One often cited but 10-year-old report found that 65% of Etsy sellers make less than $100 a year; a more recent survey suggests the typical Etsy shop brings in a median profit of $291 a month.
Whether they’re making $1,000 a year in sales, or $100,000, artists and crafters selling through online marketplaces need to pay close attention to economic nexus and marketplace facilitator laws. Artists and crafters must understand exactly which tax compliance steps they’re responsible for, and which ones the marketplace will perform for them. The requirements vary from state to state.
Direct online sales can create economic nexus
Artists or crafters who sell their creations directly to customers who come into their studio likely have business registration requirements, and in 45 states, they’ll need to collect sales tax on transactions and remit the money they collect to the proper authorities. (Only New Hampshire, Oregon, Montana, Alaska, and Delaware don’t impose a general state sales tax; however, Alaska does allow local governments to levy their own sales taxes.) That’s because having a physical presence in a state — or physical nexus, in legal parlance — establishes a sales tax obligation.
Likewise, if they’re taking orders and closing sales directly from their own websites, artists and crafters also must be aware of economic nexus. In short, economic nexus is the legal concept that a business creates a connection with a state when it does a certain amount of business there, which in turn creates tax compliance obligations.
Selling one painting from a website — or a set of earrings or a box of handmade soap — probably won’t trigger a requirement to collect and remit sales tax in a state. However, making a single sale to one of the state’s residents could trigger a requirement to register as a business there if the sale exceeds the state’s economic nexus threshold, which in many states is $100,000.
By 2023, all states that levy sales tax will require out-of-state sellers to collect and remit sales tax on transactions with buyers in those states once a vendor records a specific number of sales, or the dollar value of those sales exceeds a specific threshold. In fact, all states but one (Missouri) already enforce nexus.
For details on this, check out our state-by-state guide to economic nexus laws.
What are the benefits of selling at arts and crafts fairs?
Some artists and crafters primarily market their pieces through fairs and shows, spending days driving between shows to sell to buyers looking for one-of-a-kind pieces. Others supplement their online marketing efforts with appearances at a select number of in-person events.
There are advantages to this kind of in-person selling.
For starters, selling directly to a customer at a fair or show means the artist keeps more of the money from a sale, because they aren’t paying a commission to a dealer or gallery — just a booth fee to the festival organizer.
Experts say there’s a certain energy at a craft fair that can’t be duplicated online, and for artists — who are often selling themselves as much as their creations — that can help create lasting relationships with potential new buyers who may become collectors. Fairs are opportunities for artists to build both their brands and their email lists.
The fairs are also opportunities for artists to network, to test new art styles or mediums to see how they sell, and to find inspiration in the work of other artists and craftspeople. In some cases, traveling to a crafts fair can open up opportunities to meet with gallery or shop owners who might be looking for new art or crafts to sell.
Tax compliance for sales at art shows
When an artist makes a sale at a fair or show, there are tax compliance considerations. Specifics vary from state to state.
Some states have specific rules for temporary vendors, like art show or craft fair sellers. Washington is one of them, so if you’re going to have a booth at the Squirrel Fest, you’ll need to follow Washington Department of Revenue guidelines for temporary business activity. The state has made it easy by providing a temporary registration certificate you can fill out online.
Other states treat craft fair vendors like any other business. That means that if you’re going to sell at the Fort Ransom Junk, Vintage & Craft Fest, you’ll need to follow North Dakota’s standard laws that apply to all merchants; this can include registering for a sales tax permit and collecting both the state’s 5% sales tax and Fort Ransom’s 2% local sales tax.
This brings up an important point: Many states allow local jurisdictions to add their own sales taxes on top of the state’s basic rate, so tax rates can vary between counties and cities, and sometimes even within cities. You can use our sales tax calculator and tax rate lookup tool to determine tax rates for any location inside the United States.
Veterans of the art show/craft fair circuit advise new sellers to reach out for help from the organizers of the shows they want to attend. In many cases, organizers will be able to provide artists and crafters with guidance on relevant state and local business registration, tax collection, and remittance requirements. In some states, event organizers are required to submit lists of the vendors who have booths at their shows to tax authorities. In others, like Arizona, event organizers may be able to run all vendor sales through their own sales tax license.
If organizers aren’t able to help, our state-by-state guide to craft fairs and sales tax has summaries and helpful links to help you figure out the rules you’ll need to follow to comply with the state and local tax requirements at shows across the United States.
For more helpful information about sales tax collection for arts and crafts sellers, check out our earlier post on this topic, which addresses issues like how to handle taxes if you’re selling food or beverages at a fair, and whether you should incorporate sales tax into the asking price for your work.
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