Behind the Scenes - A Glimpse to Tax Calculations

Due to increasing tax obligations, marketplaces like Etsy now collect and remit taxes for buyers. Etsy partners with Vertex for tax calculations based on buyer and seller location, product category, and tax rules. When a buyer adds an item to their cart, Etsy calls Vertex's Quotation Request API to determine the tax amount. When the order is created, Etsy uses the DistributeTaxRequest API to send order information and tax details to Vertex. Etsy collects tax from buyers and remits it to the appropriate authorities. Vertex provides various report formats, which Etsy imports into its big data system. Mapping Etsy product categories to Vertex tax categories involved collaboration between engineering, tax, and analytics teams. To handle increased API traffic, Etsy implemented multiple instances for Vertex calls and shadow logging to simulate stress on Vertex and monitor checkout experience. These upgrades ensured smooth checkout without delays. Etsy continues to improve its design to support increasing traffic and data volume, with future plans to address analytics, reporting, and configuration synchronization.