Do You Have to Charge Sales Tax on Laser Cut Items You Sell in the US?
In most US states with a sales tax, sellers of physical goods must collect it, usually after registering for a sales tax permit. Etsy collects and remits sales tax on many of its US orders, but sales at craft fairs or on your own website are often your job. Rules differ by state and city, so ask your state tax agency.
Sales tax is a tax on retail sales collected by the seller and passed to the state, and in the US it works state by state because there is no federal sales tax. When you sell laser cut items, the question is not only "do I charge it" but "where, on what, and who collects it". This is general information, not tax advice; your state's department of revenue has the final word.
The basics
| Question | General answer |
|---|---|
| Is there a federal sales tax? | No. States, and some cities and counties, set sales taxes. |
| Which states have no statewide sales tax? | Alaska, Delaware, Montana, New Hampshire and Oregon; some local taxes may still apply (for example in Alaska). |
| Do I need a permit? | Most states with a sales tax ask sellers to register for a sales tax permit before collecting. |
| Are all products taxed? | Not always; rules about what is taxable vary by state. |
| Do online sellers charge it? | Often, depending on where the buyer is and where you have sales or presence. |
Where you sell changes who collects
| Sales channel | Who usually collects | What you do |
|---|---|---|
| Etsy (US orders) | Etsy collects and remits in many states under marketplace laws | Check your Etsy tax settings; keep records |
| Craft fair or farmers market | You | Hold a permit if required; charge and report |
| Your own website | You | Set up tax collection and register where required |
| Wholesale to shops | Often the buyer, with a resale certificate | Collect the certificate; keep it on file |
| Custom orders by email | You | Charge based on delivery location rules |
Etsy and several other marketplaces collect and remit tax for orders in many states, but not necessarily for sales you make elsewhere. You may still need to register or file even if Etsy collects, depending on your state. Check both the marketplace and your state.
Remote sellers and economic nexus
Since a 2018 US Supreme Court decision (South Dakota v. Wayfair), states may require out-of-state sellers to collect sales tax once they pass a sales or transaction threshold in that state. The thresholds and rules differ by state, so a seller shipping from one state to many may owe tax in several. If you sell mainly on a marketplace that collects for you, this affects you less; if you sell on your own website, it can matter a lot.
Buying materials: resale certificates
Some states allow a seller to buy materials that become part of a product without paying sales tax by showing a resale certificate or similar document. The rules differ, and some materials, such as tools and the laser itself, are normally taxable. Ask your state which of your purchases qualify.
Worked example
Suppose a state and local combined rate of 7 percent (an assumed figure for the example). You sell a 40 dollar sign at a craft fair. The tax is 2.80 dollars, so the customer pays 42.80. That 2.80 is not your income: you report it and pay it to the state on the schedule your permit gives you. Many sellers set aside the tax in a separate account so it is not spent by accident.
Records to keep
- Your permit number and renewal dates.
- A list of sales with the tax collected.
- Resale certificates received from wholesale customers.
- Marketplace tax reports.
Common mistake: Assuming Etsy handles all your tax. It handles tax on many Etsy orders. Your craft fair, wholesale and website sales may still be yours to handle, along with income tax.
Next step
Visit your state's department of revenue website, find the page for sales tax permits for small sellers, and write down the answers to three questions: Do I need a permit, what is taxable, and how often do I file. If your situation is complicated, a short session with a tax professional can save you a lot of trouble. For the bigger picture, read is a small laser business profitable and how to sell laser cut items on Etsy.
Questions and answers
Do I need a sales tax permit to sell at craft fairs?
In many states with a sales tax, yes. Check with your state tax agency and with the event organiser.
Does Etsy charge sales tax for me?
Etsy collects and remits sales tax on many US orders, but not necessarily on your sales elsewhere. Check Etsy and your state.
Which US states have no sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax, though local taxes can apply in some.
Can I buy materials without sales tax?
Some states allow it with a resale certificate for materials that become part of a product. Rules vary, so ask your state.
Is sales tax my income?
No. It is money you collect for the state and must report and pay. Keep it separate.
Do I still pay income tax on my sales?
Sales tax and income tax are different. Ask a tax professional about income tax on your business earnings.