@sylviebee wrote:
I have a store on Etsy (and RL) and something Etsy does that I've never fully understood it that Etsy is very involved in cash flow.
That is, buyers pay Etsy for items and then Etsy in turn pays Sellers.
Not exactly. For the longest time, Etsy permitted sellers to decide whether to accept Paypal only, Paypal plus Direct Checkout (Etsy's credit card, etc. processing system) as separate payment systems, or more recently, Paypal and Direct checkout as a combined feature.
Paypal payments by buyers have always gone directly to the seller, not through Etsy. I suspect that Etsy's original payment system (Direct Payments) was designed to handle much lower volumes of transactions, and was set up so that they could keep track of sellers' actual income. It's just a different means of approaching the online transactions between buyer and seller, and I imagine their computer accounting system is now more or less stuck with it.
However, keep in mind that Etsy entirely handles -- that is, collects and remits -- VAT for sellers at the time of the transaction, a big time saver and problem-solver for sellers. The buyer sees the VAT up front and pays it at the time of purchase, saving surprises for both parties. The intervention of Etsy in collecting payments, then paying sellers, allows them to do this much more easily.
EBay leaves it up to the buyer to pay on receipt, which has been the cause of many issues for sellers, especially to Europe and the U.K. Well, actually, eBay does do this with the GSP, but in a way that generates extra income for Pitney Bowes and creates higher costs for buyers (no doubt eBay gets something from Pitney Bowes too).
I was actually surprised that Etsy didn't decide to charge sellers a fee for collecting and remitting the VAT, as there must be a fair amount of accounting involved at their end. I actually wouldn't be averse to paying a small fee in order to make purchasing easier and clearer for buyers and selling easier for me.
Up to this point, the VAT payments were dealt with differently by Etsy depending on whether the buyer chose to pay with Paypal or Direct Payments. For the former, Etsy bills the VAT back to the seller; for the latter, the buyer pays directly and the seller never has to be involved at all.
However the recent move to integrating the payment system will likely help Etsy in these transactions. Since they're not charging sellers for the VAT collection service, it's hard to justify complaints about a better-integrated payment system that will streamline the process. Doubtless the integrated payment system will also help to make the whole accounting process for Etsy simpler.
