The transaction fee is the Etsy fee everyone quotes: 6.5%. It is also the fee most makers work out wrong, because the 6.5% is not charged on your item price alone.
It is charged on more than that, and the extra part — shipping — is the surprise that quietly eats into what you keep.
What the 6.5% is charged on
Etsy charges the transaction fee on three things added together:
- The price of the item
- The shipping you charged the buyer
- Gift wrap, if the buyer paid for it
Say you sell an item for $30 and charge $5 for shipping, with no gift wrap. You might expect 6.5% of $30, which is $1.95. That is not what happens. Etsy works out 6.5% of $35, which is $2.28. The shipping added 33 cents of fee.
That difference looks small on one sale. On a hundred sales, it is $33 you did not plan for. On shipping-heavy items, like heavy candles or framed prints where shipping might be $12 or $15, the extra fee is much larger.
What it is not charged on
The transaction fee is not charged on sales tax. If the buyer paid sales tax on top of the price and shipping, that tax amount is left out of the transaction fee calculation.
This matters because another Etsy fee — payment processing — does the opposite. Payment processing is charged on the full order total including sales tax. Two fees, two different rules. If you use the same starting number for both, one of them will be wrong.
The transaction fee is also not a one-time fee per listing. It is charged on every sale. Sell the same item ten times, and you pay the transaction fee ten times, each time on that sale's price plus shipping plus gift wrap.
The gift wrap surprise
Gift wrap feels like a small extra service. A buyer adds it for a few dollars, you wrap the item, everyone is happy.
But because gift wrap is part of what the transaction fee is charged on, offering gift wrap raises the fee slightly too. Say gift wrap is, for example, $5. The transaction fee on that $5 is about 33 cents. You still keep most of the gift wrap money, but not all of it. Price gift wrap knowing that a slice of it goes in fees, just like the item itself.
"But I offer free shipping"
Free shipping does not dodge this fee. If you offer free shipping, you usually raise the item price to cover the postage. Say an item was $30 plus $5 shipping, and you change it to $35 with free shipping. The transaction fee was 6.5% of $35 before, and it is 6.5% of $35 now. Nothing changed except the label.
That does not mean free shipping is a bad idea. Buyers may like it. It just means you should choose it for the buyers, not as a way to lower fees, because it does not.
How to see it in your statement
Open your Etsy payment account and look at a single order, not the monthly total. The monthly total mixes dozens of sales together, and you cannot learn anything from it.
On one order, find the transaction fee line. Now check it yourself: add the item price, the shipping charged, and any gift wrap. Multiply by 0.065. That is 6.5% written as a decimal. Your answer should match the line on the statement, give or take a cent of rounding.
If your answer is lower than Etsy's line, the usual reason is that you left shipping out. If your answer is higher, the usual reason is that you included sales tax by mistake.
Doing this check once, by hand, on one order teaches you more than reading about the fee ten times. After that, you will never price an item again without thinking about the shipping part.
What this means when you price
When you set a price, the shipping you charge is not separate money that sits safely to one side. It is part of the amount Etsy charges on. So if your postage costs you $5 and you charge the buyer $5, you do not break even on shipping. You lose the fees charged on that $5.
Some makers charge a little more than the postage costs to cover that. Some fold it into the price. Either can work. What does not work is assuming $5 charged means $5 kept for postage.
If you want to test a price and shipping charge together before you list, the free pricing calculator on mykeptmoney.com shows the transaction fee and the other Etsy fees on that exact combination, so you can see what you would keep.