Scores of Etsy sellers are panicking about selling to UK customers thanks to confusing new sales tax rules
- Etsy sellers have been caught off guard by complex tax changes that require them to pay VAT to the UK's tax authority if they are based overseas and selling to British consumers.
- The tax change, which coincides with Brexit, but is not a direct consequence of it, has more generally caused chaos for all overseas sellers with British customers.
- As a marketplace, Etsy is authorized to process and remit the VAT on behalf of its sellers, but has been slow to make this change after the tax change kicked in January 1.
- Sellers who have already received their first UK orders for 2021 told Business Insider that Etsy is not yet collecting VAT on their behalf, and they fear customers may be stung for the tax on delivery.
- Business Insider understands Etsy has been ramping up its systems and its price and VAT listings will be up-to-date in the coming days.
- Visit Business Insider's homepage for more stories.
Etsy sellers have been thrown into confusion by complex changes to the way the UK collects Value Added Tax (VAT) on the goods they sell, which kicked in on January 1 2021.
The changes, which coincide with but are not a consequence of Brexit, broadly mean that anyone outside the UK selling and sending physical goods under £135 to British customers must pay the correct VAT to the UK's tax authority.
Sellers must register with the UK's HM Revenue and Customs, calculate and collect the correct amount of tax, and hand it over. The Financial Times earlier reported that the changes has generally thrown many overseas sellers into chaos.
Etsy is a marketplace platform founded in 2005, and has long been popular as a destination to buy craft items, homeware, jewellery, and other items from independent sellers. As such, many of its sellers are not professional retailers.
Most Etsy sellers wouldn't need to register with HMRC because, as an online marketplace, Etsy is able to collect VAT on smaller items on behalf of these sellers, according to the tax authority's rules. The same applies to Ebay and Amazon, also online marketplaces.
Etsy on its site explicitly promises to show VAT-inclusive prices to UK buyers, and says it'll collect the tax where applicable.
But according to sellers who spoke with Insider, plus complaints from sellers on Etsy's forums, the marketplace has been slow to indicate whether it's actually collecting and remitting VAT on their behalf — some five days after the rules changed.
Some sellers who have already received their first orders from UK customers for 2021 are now in limbo as to whether they should ship their items at all, in case their customers are stung for the tax on delivery or for fear of breaking any rules.
One New York-based artist, Lulu, runs a popular Etsy store selling enamel pins and other accessories, with a focus on mental health. She found there was no indication on the price listings, or on the packing slip the site provides after a sale, of how the tax would be collected.
Lulu told Insider: "The packing slip doesn't mention it at all and the [dollar-sterling] conversions are too close to assume it was collected. I contacted the UK customer and they said on their end that all it said was "VAT would be collected where applicable."
Another France-based seller, who declined to speak directly to Insider, briefly posted a notice on his shop halting all sales to the UK, complaining that it wasn't clear whether customers may need to pay VAT on delivery.
Another seller Marissa, who sells colorful handmade soap, spoke to Insider on Tuesday and relayed the same tale.
"Etsy was supposed to automatically implement VAT starting 1st January and I had an order come in on that day from the UK," she said. "However when I printed the packing slip and invoice, it wasn't reflected and my customer only paid for the item and shipping like usual. I read the forums and a lot of people said they didn't get charged VAT either."
Etsy declined to comment when approached by Insider. However, a source close to the company said sellers and buyers should see the UK VAT changes reflected properly over the coming days.
In an update on Wednesday, seller Marissa said that Etsy had began updating prices on her store to reflect the VAT changes.
It isn't clear where this leaves sellers still awaiting the changes, however, and it's possible some UK buyers will end up paying VAT on delivery.
Lulu told Insider she ended up directing her British customer to another site she uses, which is set up to collect VAT correctly and, like many on Etsy's forum, expressed irritation at the slow rollout. "They really needed to be more open about that since the whole VAT thing was starting on the 1st," she said. "It creates a problem for us when we have customers and then the order is incomplete as it were."
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