Side Hustles · E-commerce
Start an Etsy shop that actually pays
Every fee, a worked pricing example, setup steps, taxes and California rules for 2026.
Learning how to sell on Etsy starts with the math: a 20-cent listing fee, a 6.5% transaction fee and a payment processing fee come out of every sale before you see a dollar. Get the fees and pricing right, and Etsy can turn a craft, a vintage find or a digital design into a steady side income.
Etsy is an online marketplace for handmade goods, original designs, vintage items and craft supplies. It brings the buyers; you bring the products, photos and service. In its third quarter 2026 shareholder letter, released Oct. 28, 2026, Etsy reported $2.6 billion in marketplace gross merchandise sales for the quarter, up 8.8% from a year earlier, and about 88 million active buyers over the previous 12 months.
This guide walks through the fees in plain numbers, the steps to open a shop, how to price so you make money, the taxes that apply and the California rules for sales tax. If you are still choosing a side business, start with our side hustle ideas guide.
What Etsy charges sellers in 2026
Etsy’s fee pages list several charges. Three apply to almost every sale; the others depend on the tools you choose.
Etsy seller fees (U.S. shops)
| Fee | Amount | When it applies |
|---|---|---|
| Set-up fee | One-time; varies by location | Shown and charged when you open the shop |
| Listing fee | $0.20 per listing | When you publish; each listing lasts 4 months, sold or not |
| Multi-quantity and auto-renew | $0.20 each | Each extra unit sold, or each automatic renewal |
| Transaction fee | 6.5% of the order total | On every sale, including shipping and gift wrap |
| Payment processing | 3% + $0.25 per order | On the total sale price, including shipping and sales tax |
| Offsite Ads | 15% (12% for shops over $10,000) | Only when a buyer clicks an Etsy ad off-site and buys within 30 days; capped at $100 per order |
| Etsy Ads | Varies (you set a budget) | Optional ads in Etsy search results |
The payment processing rate in the table is the U.S. rate for Etsy Payments; Etsy lists different rates for bank accounts in other countries. Etsy also says the one-time set-up fee varies by location and appears during shop setup, so check the amount on screen before you confirm.
Etsy advertises listings on search engines and social media and charges a fee only when an ad leads to a sale within 30 days. Shops that have never made $10,000 in any 365-day period pay 15% on attributed orders and may opt out. Once a shop reaches $10,000, the rate drops to 12%, and the shop must stay in the program for life. Build that possible cost into your prices.
A worked example: where a $46 order goes
Fees are easier to see on a real order. Say you sell a ceramic mug for $40 and charge $6 for shipping, an order total of $46. This example leaves out sales tax, which Etsy collects from California buyers and which also carries the processing fee.
Illustrative example: a $46 Etsy order
Illustrative example. If an Offsite Ad brought the buyer, add a 15% fee ($6.90), which lowers the payout to $34.28.
Etsy fees on the example order
Illustrative example: $4.82 is about 10.5% of the $46 order, before any Offsite Ads or Etsy Ads fees.
That roughly 10% fee share is a good planning number for shops that do not pay for ads. With an Offsite Ads sale it jumps to about 25%. From what is left you still pay for materials, packaging, the actual postage label and your own time.
How to set up your Etsy shop, step by step
Opening a shop
- Check what you can sellEtsy says every item must be made, designed, handpicked or sourced by you: handmade goods, your own designs and digital downloads, vintage items at least 20 years old and craft supplies. Reselling mass-produced items is not allowed, and AI-made designs must be disclosed.
- Create an account and name your shopPick a short, searchable name that fits your products and is not someone else’s trademark.
- Set up payments and billingConnect a bank account for Etsy Payments deposits and add a card for fees. Use a separate business account to keep records clean.
- Pay the one-time set-up fee if shownEtsy displays it during setup when it applies.
- Write strong listingsUse clear photos on a plain background, a title with the words buyers search, every tag field and an honest description with size, materials and care.
- Set shipping and policiesChoose processing times you can keep, calculate shipping and post return and custom-order policies.
- Launch with a small, focused collectionStart with 10 to 20 listings in one niche, then add what sells.
Price so the shop makes money
Many new sellers price by looking at competitors and then lose money on every sale. Build the price from your costs instead, then check it against the market.
A simple pricing formula
Illustrative example for the $40 mug. About $4.25 of the margin covers Etsy fees on the item price alone; the rest is profit and a cushion for ads, returns and price tests.
- Pay yourself an hourly rate. If the price does not cover your time, the shop is a hobby.
- Price shipping honestly. Free shipping can lift sales, but the cost must be built into the item price because Etsy still charges 6.5% on the full order.
- Test higher prices. Handmade buyers often pay for quality; raise prices when orders come faster than you can make them.
Taxes for Etsy sellers
Etsy income is business income. The IRS says payment apps and online marketplaces must send a Form 1099-K when payments for goods or services exceed $20,000 in more than 200 transactions, and may send one for lower amounts. Either way, the IRS is clear: you must report all income on your tax return whether or not you receive a 1099-K.
Once your net earnings from self-employment reach $400, you also owe self-employment tax of 15.3% for Social Security and Medicare. Track every expense: materials, packaging, shipping labels, Etsy fees, equipment and a share of your home studio if it qualifies. Our side hustle taxes guide and quarterly estimated taxes guide show how to set money aside and pay during the year.
California sales tax and seller’s permits
California treats Etsy as a marketplace facilitator. The California Department of Tax and Fee Administration (CDTFA) says that since Oct. 1, 2019, a marketplace seller does not need a seller’s permit if all of its retail sales are made through a marketplace facilitator registered with CDTFA, because the marketplace collects and pays the sales tax. You do need a permit if you also sell directly to California customers, such as at craft fairs or on your own website.
Your city or county may also require a business license and, if you use a shop name that is not your own, a fictitious business name filing. Sacramento sellers can start with our Sacramento business license guide.
Tips to get found and earn repeat buyers
- Use buyer words in titles and tags. Write what a shopper would type, such as “handmade ceramic coffee mug,” not a clever product name.
- Make the first photo count. Natural light, a clean background and the item in use.
- Answer messages fast. Quick, friendly replies lead to reviews.
- Ship on time, every time. Late orders cost reviews and search visibility.
- Start ads small. Etsy Ads can work, but set a low daily budget and track which listings earn back the cost.
- Bring your own traffic. Share listings on social media; our Instagram for business guide covers the basics.
Common mistakes
- Forgetting fees in the price. Listing, transaction and processing fees take about 10% before ads.
- Ignoring Offsite Ads. A 15% fee on an ad-driven sale can erase thin margins.
- Selling items Etsy does not allow. Resold mass-produced goods can get listings or shops removed.
- Skipping records. Without receipts and mileage logs, you pay tax on money you did not keep.
- Using someone else’s trademark. Team logos, characters and brand names invite takedowns.
Key terms
- Listing fee: Etsy’s $0.20 charge to publish an item for four months.
- Transaction fee: Etsy’s 6.5% charge on the total order, including shipping and gift wrap.
- Payment processing fee: the charge for handling the buyer’s payment; 3% plus $0.25 per order for U.S. bank accounts.
- Offsite Ads: Etsy ads on outside sites that charge 15% or 12% on resulting sales.
- Marketplace facilitator: a platform, such as Etsy, that collects and pays sales tax on the sales it handles.
The bottom line: selling on Etsy is easy to start and harder to make profitable. Price from your costs, plan for about 10% in fees, watch Offsite Ads, keep tax records from day one and grow with a focused collection that buyers can find.
Free help in the Sacramento region
You do not have to work through these decisions alone. SCORE Sacramento pairs owners with volunteer mentors, many of them retired executives, bankers and accountants, at no cost. The Sacramento Valley Small Business Development Center offers free one-on-one advising on financing, budgeting and financial statements. The SBA’s Sacramento District Office can explain loan programs and connect you with lenders, and community lenders such as California Capital and Opening Doors serve owners who need smaller loans or extra support. Browse our Business Resources and the free business help guide for more.
Key takeaways
- Etsy charges $0.20 per listing, 6.5% of the order total and, for U.S. accounts, 3% plus $0.25 to process payment.
- Offsite Ads cost 15% of an attributed order, or 12% for shops that have made $10,000 in a year, capped at $100.
- On a $46 example order, fees total $4.82, about 10.5%, before any ads.
- Report all Etsy income; a 1099-K is required above $20,000 and 200 transactions.
- California Etsy-only sellers generally need no seller’s permit because Etsy collects the sales tax.
Frequently asked questions
How much does it cost to sell on Etsy?
Etsy charges a 0.20 dollar listing fee per item, a 6.5 percent transaction fee on the order total and a payment processing fee of 3 percent plus 0.25 dollars per order for U.S. bank accounts. Some new shops also pay a one-time set-up fee that varies by location.
How do I start selling on Etsy?
Check that your items fit Etsy’s rules (made, designed, handpicked or sourced by you), create an account, name your shop, connect a bank account and card, write listings with clear photos and tags, then set shipping and shop policies.
What are Etsy Offsite Ads fees?
When a buyer clicks an Etsy ad on another site and buys within 30 days, Etsy charges 15 percent of the order, or 12 percent for shops that have made 10,000 dollars in any 365-day period. The fee is capped at 100 dollars per order.
Do I need a seller’s permit to sell on Etsy in California?
Usually not, if all your sales go through Etsy. CDTFA says marketplace sellers whose retail sales are all made through a registered marketplace facilitator do not need a seller’s permit. Direct sales at fairs or on your own site require one.
Do I have to pay taxes on Etsy sales?
Yes. The IRS says you must report all income whether or not you receive a Form 1099-K. Self-employment tax of 15.3 percent applies once net earnings reach 400 dollars.
Sources
- Etsy Help: What are the Fees and Taxes for Selling on Etsy?
- Etsy Help: Etsy Fee Basics
- Etsy Help: What Can I Sell on Etsy?
- Etsy Help: What are Payment Processing Fees for Selling on Etsy?
- Etsy Help: How Etsy’s Offsite Ads Work
- Etsy, Inc.: Third Quarter 2026 Results and Shareholder Letter (Oct. 28, 2026)
- IRS: Understanding your Form 1099-K
- IRS: Self-employment tax (Social Security and Medicare taxes)
- California Department of Tax and Fee Administration: Tax Guide for Marketplace Facilitator Act
Keep reading on Inksight
- Business Credit vs. Personal Credit: What Every Small Business Owner Should Know
- How to Choose a Business Structure in California: Sole Proprietorship, LLC, S Corp or C Corp
- Business Banking 101: How to Choose and Open a Business Bank Account
- Small Business Funding Options: Loans, Grants and Investors
- Business Resources: all guides →
