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When you're calculating your income for tax purposes, you should include the total amount you earned from your sales, including the part that was used to cover shipping fees. Then, you can deduct those shipping fees as a business expense. So, even though Etsy deducts shipping fees before depositing your earnings, for tax purposes, you'll report your gross income and then take the shipping costs as a deduction. This way, you're only taxed on your net income, not the total amount you earned before shipping costs were deducted.
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