So Crafty: Handmade at Amazon v Etsy
- Sales Tax News
- Oct 8, 2015 | Gail Cole
Etsy has been the go-to online marketplace for the makers of the world since it launched in 2005. It has had its fair share of growing pains, as when it started allowing sellers to sell manufactured goods in 2013 and when it went public earlier this year. Beginning today, it will face what may be its greatest challenge yet: Handmade at Amazon.
Handmade at Amazon launched this morning with “80,000 items made by 5,000 sellers in 60 countries.” According to the Amazon press release, more than 30 percent of the products “can be personalized by artisans to delight customers.”
Hand picked for Handmade
To prepare for today’s launch, Amazon spent months reaching out to artists, artisans and craftspeople, inviting them to sell through Handmade at Amazon. Many Etsy sellers received invites, although not just anyone can sell through the new marketplace. Amazon is “carefully vetting seller applications to determine whether their wares are strictly handmade. To list, artisans must give details of their manufacturing process, including what tools and machines they rely on. Outsourcing is not allowed.”
Handmade sellers include a photograph and information about themselves and the items they create. Peter Faricy, VP for Amazon Marketplace, says, “Knowing an item has a unique story behind it creates a personal experience that customers have told us makes owning handmade items special” (Business Wire).
Special or not, craftspeople want their products sold. From the start, Handmade at Amazon sellers have easy access to Amazon’s 285 million active customers — notably more than the 22 million customer accounts at Etsy. For non-personalized products, sellers can use Fulfillment by Amazon, which enables them to store products in Amazon fulfillment centers. Amazon then fulfills orders, packs and ships products, and handles customer service.
Both Etsy and Handmade at Amazon charge for their services. Handmade at Amazon sellers pay 12% of sales (monthly fees waived). By contrast, Etsy sellers pay 20 cents per listed item, a 3.5% transaction fee, and a 3% + $0.25 payment processing fee. Etsy sellers package and ship their products themselves, while Handmade at Amazon sellers enjoy reduced shipping costs or divorce themselves from shipping altogether by using Fulfillment by Amazon.
Sales tax side effect
Etsy has long been a good sales venue for makers and craftspeople. Presumably, Handmade at Amazon will be as well. The more makers sell, the more they need to worry about sales tax.
The Etsy Seller Handbook includes an entry on how to determine your sales tax. It tells sellers about nexus: “Basically, nexus means that a business, like yours, must have some physical connection to a state to be required to collect sales taxes there.” And it says that Etsy sellers “need to decide which states you have nexus in.”
Many small sellers only have nexus in the states where they live and work; since most states with sales tax have multiple local rates, sales tax compliance in one state can still be quite complex. In addition, circumstances (such as selling at crafts fairs or having friends or relations in other states help make the items sold) can trigger nexus in other states. There’s an Etsy help page where sellers can use zip codes to find sales tax rates, but zip codes are the wrong tool for the job. Learn about the limitations of Etsy sales tax reporting.
Handmade by Amazon sellers participating in the Fulfillment by Amazon program could have nexus in any state with an Amazon fulfillment center — a moving target given Amazon’s rapid expansion. As sales grow, so will nexus. Learn more about when FBA sellers must collect sales tax.
Sites like Etsy and Handmade by Amazon are ideal tools for helping makers reach a larger market. And sales tax software for reporting and filing is often the best way for these sellers to handle sales tax. See how it works.