Many established Etsy shops operated by mainland Chinese sellers recently faced an unexpected crisis. While their businesses were running smoothly, a platform policy update suddenly threatened their operations. The issue stemmed from Etsy's implementation of the European Union's DAC7 tax transparency directive, which requires sellers to verify their account information.
The DAC7 Policy and Seller Verification
The DAC7 directive aims to combat tax evasion in cross-border e-commerce. To comply, Etsy must collect and validate seller information including names, addresses, and tax identification numbers. While straightforward for most international sellers, mainland Chinese merchants encountered unique complications during the verification process.
The Verification Roadblock
The core issue emerged at the third verification step, which requires tax identification details. Unlike business entities, individual sellers from mainland China typically lack formal tax IDs. This created an impossible situation: the system demanded mandatory tax information that didn't exist for these sellers, graying out the proceed button and effectively freezing accounts.
Without completing verification, affected shops experienced dramatic traffic declines and faced potential suspension. Many long-standing stores suddenly found their livelihoods at risk due to this technical impasse.
Negotiating with Etsy
Resolution required extensive communication with Etsy's support team. After 16 days of persistent outreach explaining the unique circumstances of mainland Chinese sellers - particularly how individual Payoneer accounts lacked tax ID fields - the platform eventually acknowledged the systemic issue.
Unexpected Resolution
The breakthrough came when affected sellers noticed their shop traffic mysteriously returning. Etsy had quietly addressed the technical limitation, restoring accounts without requiring the impossible tax information. The platform subsequently issued an official notice confirming that verification would be postponed until a proper solution could be implemented, promising sellers 10 days' notice before reactivating the requirement.
Proactive Measures for Sellers
This incident highlights several important considerations for international Etsy merchants:
- Monitor platform policy updates regularly to anticipate compliance requirements
- Maintain open communication channels with platform support teams
- Participate in seller communities to share knowledge and solutions
- Implement regular data backups to safeguard business information
- Consider formal business registration where practical to simplify tax documentation
The temporary resolution provides relief for affected sellers, but underscores the challenges of operating in global e-commerce platforms with evolving regulatory requirements. While this particular technical hurdle was overcome, the experience serves as a reminder that international sellers must remain vigilant about compliance systems designed primarily for Western business frameworks.