Do I Need a Business License To Sell Online? Legalities Explained

Do I Need a Business License To Sell Online?

Do I Need a Business License To Sell Online? blog image

Selling goods online is a great way for entrepreneurs to make money and establish themselves in the world of eCommerce. Before launching their business, one important thing many people ask themselves is “Do I need a business license to sell online?”

The answer depends on several factors, including where your business is and what type of products or services you plan to offer. In this article, we will cover the basics of business licenses, and when and how to get them for your online business website.

Takeaways
  • Business license regulations for online businesses vary across the country
  • There are lots of licenses that could apply to your online business
  • Each state has its regulations for businesses, both online and in-person
  • Most online retailers don’t need a business license, but your state does
  • Products that could cause legal trouble will need more licenses (firearms, drugs, etc.)
  • Go through your local government’s business or secretary of state website to apply for your license

Do I Need a Business License To Sell Online in the US?

If you plan to operate an online business in the US, then you will likely need some form of business license. The exact requirements vary from state to state and city to city. However, most jurisdictions ask businesses to get a basic business license before they can start selling products or services.

Also, certain types of businesses may need to get other licenses or permits. This depends on their activities (e.g., food service establishments).

In general, it’s important for entrepreneurs who plan to sell online in the US to research local laws and regulations related to business licenses and any tax deductions from the state sales tax amount before starting their operations.

It’s also wise for entrepreneurs to contact their local city or county offices to learn about appropriate licenses and any more licensing authority requirements they may need to conduct business.

Do Brick-and-Mortar Stores Require an Additional Business License To Sell Online?

If you already operate a brick-and-mortar store, then you may be able to use your existing business license for online sales. Often, entrepreneurs must get another permit or license to sell products or services online.

It is important to note that even if your business has an existing physical location, the local government agencies might ask you to get a separate license (or register with a different agency) before selling goods and services online.

Again, it’s best to contact your local city or county offices or a business attorney for more details on any extra requirements related to selling online.

What Is an eCommerce Business License?

A business license, also known as a general license, business operating license, or business privilege license, is an official document that grants your business permission to legally operate.

It serves as proof that you are allowed to conduct certain legitimate business activities within a state or locality. There is no specific online business license.

Depending on the specificities of your online business and where it is located, there may be extra business licensing required for operating legally.

Types of Business Licenses for Online Selling

State And Local Operating Licenses

Depending on the state you’re located in, you may need a business license to operate legally. This includes any type of online business from retail stores to professional online services, like website design or consulting.

Generally, operating licenses are obtained through your local government office. You’ll need to pay an annual fee and submit other documents for approval.

Specialty Licenses

These types of licenses are typically obtained through the state government office. They will need extra fees and paperwork for approval. They are for those in certain states selling firearms, alcohol, tobacco products, food items, and more.

Federal Licenses

Like specialty licenses, this type of license is usually needed for businesses that deal with products or services that could undergo legal scrutiny, such as firearms, alcohol, and drugs.

Depending on the nature of your business, you may also need to register with the IRS and apply for certain tax IDs to operate legally.

“Doing Business As” License

If you plan to operate your online business under a name other than your own, you may need to obtain a “Doing Business As” (DBA) license.

A DBA allows the business owner to use an alternate name for their company and will require registering it with the local government office.

Once approved, this type of license is valid for up to five years.

Other Types of Licenses You Might Need

Seller’s Permit Or Vendor’s License

This is a type of business license required by many states for businesses that sell tangible goods. This type of license authorizes the holder to collect sales tax on items sold in their state. The requirements for obtaining this type of license vary from state to state, so it is important to research your local regulations before applying.

Sales Tax License

Depending on the state, city, and county where your business is located, you may need to register with the local Department of Revenue for a sales tax license or sales tax permit. The sales tax license will allow you to collect taxes from customers who purchase your products or services online.

Employer Identification Number

An Employer Identification Number, or EIN, is a nine-digit number issued by the IRS that identifies your business for tax purposes. This is necessary if you plan to hire employees or open a business bank account.

It’s also required for filing certain taxes and reporting income from selling goods online. You can obtain an EIN electronically through the IRS website without any paperwork or fee.

Home Occupation Permit

The Home Occupation Permit is required by many municipalities for businesses that are conducted from a home, or home-based businesses.

The HOP allows you to operate a business from your residence, provided that the business does not disturb or inconvenience the surrounding neighborhood. Depending on where you live, this permit may be required to open an online store.

Professional/Occupational License

This is a form of permit issued by the federal government that allows you to practice a certain profession, such as medicine, law, accounting, engineering, etc.

Depending on your location and the type of business you plan to open, you may need one of these general business licenses to legally operate your business.

You can typically obtain these federal business licenses only through the relevant state governmental or federal agency themselves.

Business License Requirements by State

Each state has different requirements when it comes to obtaining a business license, so you should familiarize yourself with the laws in your area.

One of the best places to start looking is the U.S. Small Business Administration (U.S. Small Business Administration). They give general guidelines and are especially helpful for permits at the federal level, but they also lead you to different state requirements.

Otherwise, you can look at state government sites for your specific state for more information. Usually, the information will come from your secretary of state or business/revenue office.

Do I Need A Business License To Sell Online In Alabama?

In the state of Alabama, you will need a business license to sell online. This applies if you are selling tangible items (such as clothing or electronics), services (like web design or consulting), or digital products (like e-books). To obtain your license, you must apply and pay any applicable fees.

You can learn more from the Alabama Department of Revenue.

Do I Need A Business License To Sell Online In Arizona?

In Arizona, you will need a business license to sell online. The type of license you’ll need depends on the type of products or services you plan to offer.

You can learn more from the Arizona Department of Revenue.

Do I Need A Business License To Sell Online In California?

In California, you need a seller’s permit if you sell or lease tangible personal property that requires sales tax collection. This includes items such as clothing, furniture, electronics, and more. The permit also covers any services related to the sale of these items (such as installation).

You can learn more from the California Government.

Do I Need A Business License To Sell Online In Florida?

In the state of Florida, you need a business license if you are selling goods or services. This includes online sales. The type of license and permits needed depends on the specific nature of your business and can be obtained from the Department of Business & Professional Regulation in Florida.

You can learn more from the Open MyFlorida Business Service.

Do I Need A Business License To Sell Online In Georgia?

In Georgia, all businesses selling goods online must obtain a business license and register with the Secretary of State to comply with state laws. The requirements are for both domestic and international online sellers.

Additionally, you may be required to file an annual report or other paperwork depending on your business type and size.

You can learn more from the Georgia Department of Revenue.

Do I Need A Business License To Sell Online In Maryland?

In Maryland, if you’re selling tangible products or services online, you will need to obtain a business license. The process for obtaining a business license in Maryland is straightforward and requires applying with the Department of Assessments and Taxation (DAT).

The application must include information about your business such as its name, address, type of goods/services offered, and contact information. You may also be required to provide proof of insurance coverage for your business.

You can learn more from Maryland Business Express (MBE).

Do I Need A Business License To Sell Online In Michigan?

In the state of Michigan, business owners must obtain a business license before they can legally operate. This is true for both traditional brick-and-mortar businesses and those that operate solely online. The process for obtaining a business license in Michigan starts with registering your company with the Department of Licensing and Regulatory Affairs (LARA).

Once you have registered your company with LARA, you will need to complete an application for a Business License Certificate. Then you’ll apply along with any necessary fees or documents to the appropriate agency within your local county government office.

Do I Need A Business License To Sell Online In NC?

If you are selling online in North Carolina, the state requires that you obtain a business license from the Secretary of State. The application process is fairly straightforward and can be completed online.

You will need to provide your business name and address and basic information about your products or services. Once approved, you will be able to operate legally in the state of North Carolina and have access to governmental benefits.

Do I Need A Business License To Sell Online In Nevada?

In Nevada, a business license is required if you are engaging in any activity that involves the sale of goods or services. This includes online businesses. The state authorities require online sellers to obtain a general business license from the Nevada Department of Business and Industry (B&I).

The application process for this type of license can be found on the DBI website, and it generally takes up to two weeks for approval. Once approved, you will need to renew your license annually.

You can learn more from the Nevada Secretary of State.

Do I Need A Business License To Sell Online In NY?

In New York, the state requires all businesses to obtain a business license if they have gross receipts of $100 or more in any one year.

You can apply for a business license with your local City/County Clerk’s office. Depending on where you are located, you may also need to register with the Department of Taxation and Finance (DTF).

You can learn more from New York State.

Do I Need A Business License To Sell Online In Oregon?

Oregon requires most businesses to obtain a business license, and this includes those selling goods or services online. To apply for a business license in Oregon, you will need to register your business with the Oregon Secretary of State’s Corporation Division.

You will also need to pay an application fee and provide information about your company such as its name, address, contact information, type of business structure (LLC/partnership/sole proprietorship), etc.

Once you have registered your business and obtained your license from the state government office, you may be able to apply for other federal and local business licenses, depending on what type of products or services you offer.

You can learn more from the State of Oregon: Business Department.

Do I Need A Business License To Sell Online In Texas?

In Texas, you do not need to obtain a business license to sell goods online. This is because the state does not require general business licenses, and instead only requires specialized licenses if your work falls into certain categories, such as healthcare or automotive repair.

However, if you are planning on selling any taxable sales of items online (such as clothing or electronics) and collecting sales tax, then you must register with the Texas Comptroller of Public Accounts to collect sales tax from customers.

You will also need to file reports periodically and remit taxes collected from customers directly to the state.

You can learn more from Texas Economic Development.

Do I Need A Business License To Sell Online In Utah?

In Utah, you will need to obtain a business license if you’re planning to start an online business. The state requires all businesses, including those operating solely on the Internet, to be registered with the Utah Division of Corporations and Commercial Code.

You can apply for the license online or in person at your local county clerk’s office. The state also charges a fee based on the type of business being formed and its estimated annual gross income.

Do I Need A Business License To Sell Online In Virginia?

In the state of Virginia, you are required to register your business and obtain a license if you plan to operate in any town or county. This includes many online businesses as well. You will need to register with the Virginia State Corporation Commission (SCC) before starting an online business in Virginia.

Additionally, depending on the nature of your business, you may be subject to additional licensing requirements from other agencies such as the Department of Taxation or the Department of Professional and Occupational Regulation.

You can learn more from the Virginia Government.

Do I Need a Business License To Sell Online in Other States?

Yes, you may need a business license to sell online in other states besides the ones listed above. Every state has different laws and regulations regarding who needs to obtain a business license, so you should research your specific area before selling any type of goods or services.

Here are a few additional sites to help you get started:

Business License Requirements by Platform

The business license requirements for selling online can vary depending on the platform you are using. Let’s look at some of the most popular options below.

Can I Sell On Etsy Without A Business License?

Etsy does not require online sellers to have a sales tax permit or a business license, but they do suggest that you check with your local government for any requirements. It is important to note that Etsy’s terms of service do state that sellers must comply with all applicable laws and regulations, so it is essential to make sure you comply with the rules of your own business location first.

Can I Sell On Shopify Without A Business License?

Yes, you can sell on Shopify without a business license. However, if you do not have one and your state requires it, then you will need to get one before continuing with the setup process.

Shopify
Shopify is a leading option for companies looking to build a strong online presence because of its reputation for providing complex yet approachable solutions. Even for people with no technical experience, Shopify's wide range of tools and services make it easier to create an online store.
Visit Shopify

Do I Need A Business License To Sell On Amazon?

Yes, Amazon requires sellers to have a business license to sell products on their platform. Without one, your account may be suspended or even terminated. The good news is that you can easily apply for a business license online and it doesn’t take long to get approved.

Do I Need A Business License To Sell On My Own eCommerce Website?

Yes, if you are selling goods or services on your own eCommerce website, you will need a business license. This applies even if you are using third-party payment processors like PayPal or Stripe to complete transactions. You should also check with your local and/or state government to see what other licenses might be required for selling online in your area.

PlatformBusiness License RequirementAdditional Information
EtsyNot required, but check with local government for any requirementsSellers must comply with all applicable laws and regulations.
ShopifyNot required, unless mandated by your stateObtain one if your state requires it before continuing setup.
AmazonRequiredNo business license may lead to account suspension or termination. Easily apply online for a business license.
Own eCommerce WebsiteRequiredEven when using third-party payment processors. Check local/state regulations for additional licenses.

Business License Requirements By Product

The type of products or services you plan to sell online can determine whether or not you need a business license.

Generally speaking, most businesses that operate solely online do not require a business license. However, some products and services may require additional licensing due to their nature.

For example, if you plan on selling alcohol online, then you will likely need an alcohol permit from your state’s Alcohol Beverage Commission in addition to the standard business license requirements. Similarly, if you are selling firearms or ammunition through an eCommerce platform, then obtaining a Federal Firearms License (FFL) is required by law. And finally, if you plan on selling pharmaceuticals, then you will need to obtain a license from your state’s Board of Pharmacy.

How To Determine Which Business Licenses You Need To Sell Online

The first step in determining which business licenses you need is to research the requirements of your local government. Depending on where you live, there may be both state and local regulations that require a business license or seller’s permit for online activities.

Additionally, certain types of businesses may require special seller’s permits or licenses.

For example, if you are selling food products, firearms, alcohol, cigarettes, or pharmaceuticals online, then you will likely need additional permits and/or licenses beyond what is required by most jurisdictions.

How To Apply for an Online Business License

1. Determine The Type Of Business License You Need

  • Identify the specific license required based on your business location and the nature of your products or services
  • Some states may accept a general “business license,” while others demand specific permits, such as seller’s permits for activities like selling food or alcohol

2. Research Local And/Or State Requirements

  • Research the applicable laws and regulations for your specific location
  • Ensure that you understand and comply with all the necessary requirements before starting your online business

3. Apply For The Appropriate License

  • Initiate the application process once you have identified the required business license
  • Typically, this process involves completing an application form and providing supporting documents, such as proof of identification or financial statements
  • Be prepared to provide additional information or paperwork based on the type of license you’re pursuing

4. Follow Up With Your Local Licensing Office

  • Depending on your location, there may be a waiting period for license approval or denial
  • Stay in contact with the licensing office to address any questions, confirm the status of your application, and ensure that all required paperwork has been received and processed

Final Word: When a Business License Is a Must

You may still wonder, “Do I need a business license to sell online?” You should research the requirements in your area to ensure you comply with all eCommerce regulations for types of products, state and federal laws, etc.

And make sure your site is ready with the Best Ecommerce Website Builders and Best Web Hosting.

Next Steps: What Now?

Learn More About eCommerce

Frequently Asked Questions

What Is Required To Open a Shop on Etsy?

To open a shop on Etsy, you will need to complete the sign-up process and create a profile. You may also need additional documentation such as business licenses or permits depending on where you are located. Additionally, if you plan to offer certain types of products or services, such as jewelry or food items, then there may be specific regulations that apply in your area. You can learn more at the Etsy Help Center.

How Much Does It Really Cost To Sell on Etsy?

The cost of selling on Etsy varies greatly depending on the type of product you are selling. Generally, it costs $0.20 to list an item for sale and 3.5% of the total sale price in transaction fees. In addition, there may also be some additional costs associated with shipping materials or advertising your shop online. You can learn more at the Etsy Help Center.

How Much Is a California Seller's Permit? 

According to the California Department of Tax and Fee Administration, there is no cost for a seller’s permit. However, you may have to pay a security deposit, the cost of which is determined by your local government.

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