Kayabyte

Etsy sales tax and fees bookkeeping

By Kayabyte · Last updated 29 October 2026

The most common Etsy bookkeeping mistakes are quiet ones: counting the deposit as income, counting sales tax that Etsy collected as sales, or forgetting the fees that came out before the money reached you. This guide explains how to keep the pieces apart. Rules for sales tax and VAT differ by country and state, so this is a practical outline, not tax advice.

1. Three kinds of rows in a statement

Every row in an Etsy statement falls into one of three groups:

  1. Income and its reductions: item sales, shipping charged, refunds.
  2. Costs: listing and transaction fees, payment processing fees, ads, shipping labels, subscription fees.
  3. Money movement: deposits to your bank, reserves, currency conversion. These are not income or expense.

If you total the whole file you get a net figure, but it mixes all three. Bookkeeping needs them apart.

2. Sales tax and VAT

In many places the marketplace collects sales tax or VAT from the buyer and remits it. In that case the amount shows in the statement but is not your revenue. Record it separately (as a tax collected line) or leave it out of sales, and ask your accountant whether you must report it. In places where you must collect and pay it yourself, it is a liability until you pay it. Check your local rules before you decide.

3. Fees

Treat every fee as a cost in the month it was charged, not the month you were paid. Offsite Ads fees are charged only when a sale comes through an ad; they are advertising. Keep subscription fees separate from per-sale fees if you want to see which part of your costs grows with sales.

4. Refunds and chargebacks

A refund reduces sales; it is not a cost. A dispute or reversal usually shows as an adjustment. Keep them visible so a bad month does not hide inside “sales”.

5. Do it in a spreadsheet

Add a Category column to each monthly CSV, assign the rows, and summarise with a pivot table. Check that categories reproduce the statement’s net figure. It takes a while for twelve months, and it is where sign errors creep in.

6. Where Balanced helps

Balanced reads the Etsy statement CSV on your Mac and assigns each row to a category by rules. Sales tax collected, fees, advertising, shipping labels, refunds and payouts each get their own category, and payouts and transfers are kept out of the totals. Change any category once and Balanced remembers it for that row type. Export a category summary or a categorised CSV for your accountant, or a Xero or QuickBooks Online journal.

Honest limits: report layouts change, so check the preview and the category totals; Balanced does not log in to your account or fetch anything, you download the file yourself; the Schedule C worksheet is a suggested grouping, not tax advice, so check it with your tax professional or accountant.

Download Balanced and try it free: the free version reads and checks everything and exports the first 10 lines per file, so you can test your own report before paying. Pro is USD 59 per year or USD 7.99 per month, for up to 3 Macs. See pricing and the help page. macOS 14 or later.