As of the 1st January 2018, Etsy is now collecting sales tax on behalf of all sellers.
This is in response to Washington State passing a law requiring large online businesses like Etsy, Amazon and eBay to collect this tax.
This essentially means that Etsy will be calculating, collecting, and remitting the sales tax for orders shipped to customers in WA.
Etsy sellers do not have to make any changes to their settings or charge this tax themselves as this is all automatically done via the Etsy checkout process. It is important to note that there is also no opt-out process for this tax.
For more information on this change: Sales Tax for Washington State (Etsy)