Do I pay out of pocket for Etsy shipping labels, or is it taken from shipping fees?

Hi! You pay for the Etsy shipping label yourself, and Etsy doesn’t “auto-apply” the buyer’s shipping charge to that label at the moment you buy it. What happens instead is: the buyer’s shipping payment is included in your order total, and the label cost is charged to your shop and deducted from your Etsy Payment account balance—so it reduces what you’ll be paid out later (or, if your balance isn’t enough, it can create an amount due).

A simple way to think about it:

• Buyer pays shipping at checkout → that money goes into your Etsy Payment account along with the item price (minus Etsy fees).
• You buy a shipping label on Etsy → the label cost is deducted from your Etsy Payment account as a separate charge.
• Your payout → you receive whatever is left after all fees/label costs, based on your deposit schedule.

So you’re not getting “reimbursed” later as a separate step—the buyer’s shipping money is just part of the pool of funds, and the label purchase is one of the expenses Etsy subtracts from that pool.

If you want to double-check it for a specific order, open your Payment account and look at the Recent activity: you’ll see the order income and a separate line item for the shipping label purchase.