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Do You Need A Business License To Sell Online?
Do you need a business license to sell art online? The answer is yes. An e-commerce business is considered an enterprise. Obtaining the appropriate seller’s permit enables you to register as a tax-paying entity and sell your goods legally.
The type of license you’ll need will vary by the type of enterprise you’re in and your local county and state regulations. Read on to find out what you need to know about the requirements, even if you’re selling online.
When Do You Need a Business License to Sell Online
Operating an online business might seem as though it’s free from the regulations that govern brick-and-mortar establishments, but that’s not always the case. You may need a business license to sell products, offer services, or engage in other commercial activities online. Here’s more detail on when and why you might need one:
- Location Requirements:
- If your local jurisdiction requires a business license, it usually applies to any type of business, regardless of its nature or location. This means if you operate an online business from your home, you must still adhere to the local licensing laws.
- Local requirements vary widely, so it’s essential to consult your city or county government to understand the specific requirements that apply to your online business.
- Home-Based Businesses:
- If you operate your business from home without frequent deliveries and pickups and you don’t have an inventory, acquiring local licenses is generally easier.
- To ensure that your business activities align with local zoning laws and do not disturb your neighbors, you may still require a Home Occupation License.
- Some jurisdictions have specific exemptions or relaxed requirements for small, home-based businesses, particularly those that don’t have customers coming and going from the home address.
- Type of Business and Products Sold:
- Certain types of businesses and products may require specialized licenses or permits. For example, selling food, cosmetics, or health-related products may require compliance with specific health and safety regulations.
- If you are selling goods that are regulated at the federal level, such as firearms or alcohol, you must comply with federal licensing requirements along with any applicable state or local regulations.
- Sales Tax Collection:
- If you are selling taxable goods, it is essential to acquire a Sales Tax Permit or Seller’s Permit in your state. Certain states might mandate that you obtain this permit, even for online sales.
- Professional Services:
- If you’re offering professional services online (e.g., legal or financial consulting), you may need professional licensing depending on your jurisdiction and the services’ nature.
Summary:
- Check local jurisdiction for licensing requirements, even for home-based online businesses.
- A home Occupation License might be necessary for home-based operations.
- Specialized licenses or permits may be needed for specific types of products or services.
- A sales Tax Permit or Seller’s Permit is typically required for selling taxable goods.
- Professional licensing may be necessary for providing certain online services.
Researching and understanding the specific laws and regulations that apply to your business is crucial. Consulting with a legal or business professional familiar with your local jurisdiction can help ensure that your online business operates in full compliance with all applicable laws and regulations.
The Role of Location in Online Business Licensing
The location makes a big difference. Licensing requirements vary from state to state and city to city. You can save yourself a lot of hassle by understanding the requirements your state or county has first.
A good starting point is the Small Business Administration. Here’s a link to some of their district offices.
Product Type and Business License Requirements
What you sell can have a big effect on the business license requirements needed to operate legally. Entrepreneurs must look into the rules for highly restricted products, beverages, and food and sort through any intellectual property issues.
Here’s some more information on state licensing requirements.
Understanding Different Business Licenses for Selling Online
There are even different types of licenses for selling on the Internet. The right type of business authorization is the foundation. And there are others you need as your Internet business grows.
Federal Business Licenses
A seller’s permit and a business certificate are distinct from one another. Obtaining a business license for your enterprise requires payment, whereas a seller’s permit is free. Additionally, you will need a federal version of the permit for your home state or city. If you’re wondering, “do you need a business license to sell online,” it’s important to clarify these differences.
As your company grows, you might need seller’s permits in other states. If you’re selling products that are regulated by the federal government, you need federal authorization. These include items like firearms and alcohol.
State and Local Business Licenses
The state and city where you operate determine what kind of licenses you need for your Internet-based business. It’s important that home-based enterprises usually need permits issued by cities rather than the states. Don’t forget to look into a sales tax license.
General Business Licenses
Depending on your jurisdiction, you’re more than likely to need a general version. These serve two different purposes. Licensing helps identify the businesses operating in a city or county. A general business license also provides revenue for your local government.
Sales Tax Permit / Seller’s Permits
The requirements for a seller’s permit vary from state to state. These are required if your online company sells goods and services that qualify to be taxed. A seller’s permit can also allow you to buy certain items without paying sales tax.
A seller’s permit enables you to charge state sales tax, while a sales tax permit specifically allows you to collect it. Both of these permits are often referred to as sales tax licenses.
Home Occupation Licenses
This is crucial if you run your business from home. A home occupation permit enables entrepreneurs to bypass the need for permits and licenses associated with commercial properties. This permit ensures that the area is zoned appropriately to permit home business operations.
| Type of License/Permit | Purpose | Jurisdiction | Cost | Applicable Businesses | Notes |
|---|---|---|---|---|---|
| Federal Business Licenses | Regulates selling of specific products like firearms and alcohol. | Federal | Variable | Those dealing with federally regulated products | Federal version needed in home state or city. |
| Seller's Permit | Allows charging of state sales tax. Enables buying certain items without paying sales tax. | State | Generally free | Online sellers of taxable goods and services | Required in home state and possibly others as the company grows. |
| State and Local Business Licenses | Determined by the state and city where the business operates. | State and Local | Variable | Internet-based businesses | Home-based enterprises often need city permits. Sales tax license may also be required. |
| General Business Licenses | Helps in identifying businesses and acts as revenue for local government. | City or County | Variable | Most businesses | More likely to be needed based on jurisdiction. |
| Sales Tax Permit | Allows the collection of state sales tax. | State | Variable (may be free) | Online sellers of taxable goods and services | Also called a sales tax license. |
| Home Occupation Licenses | Allows entrepreneurs to operate a business from home without commercial property licenses. Ensures the neighborhood is zoned for home business. | Local (City or County) | Variable (depends on locality) | Home-based businesses | Helps to avoid commercial property permits and licenses. |
How to Obtain a Business License to Sell Online
Basically, there are three steps to get one of these to sell online.
- Pick a business structure that can include a sole proprietorship if you sell online. If you’ve chosen a limited liability corporation or another type you just need to complete the steps to establish it.
- You need to file for a federal tax ID and your employee identification number (EIN).
- Next, you’ll want to conduct some research to determine which permits and licenses are required. After identifying these, submit your applications to the relevant agencies.
Identifying the Right Online Business License
Keep in mind that numerous online businesses need both state and federal licenses. To help you get started, here’s a link from the Small Business Administration.
Business License Cost
if you don’t need a federal license, there’s no cost. On the other hand, if you need one, the fees vary by your industry. A state permit and license can range from zero cost up to $5000.
Applying for a Business License
You can determine the necessary licenses and permits for starting an online shop by consulting your state’s Secretary of State office or the Department of Revenue in your area.
Meeting Compliance Requirements
There are several boxes to check to comply with your local regulations.
- Register your enterprise. You’ll need a tax number and EIN.
- Even with an online enterprise, you’ll need to check with your local government to see if you’re satisfying zoning laws.
- Certain industries are heavily regulated. For example, the Health Insurance Portability and Accountability Act (HIPPA) has rules about things like password protection.
- You’ll need to understand the reporting requirements for things like your finances.
FAQs: Do You Need a Business License to Sell Online?
Do you need a business license to sell art online?
Yes, you do need a license to sell your art online. Most artists operate as sole proprietors. Getting a business license allows you to file for a DBA (Doing Business As). It allows you to use a fictitious name.
Do I need a business license to sell crafts online?
Crafts are among the best products to sell online as a small business. However, you’ll more than likely need this authorization to sell crafts online, too. Most jurisdictions require a business license if you’re trying to earn a profit.
Do you need a business license for an online store?
It doesn’t matter whether your Omni channel enterprise, a brick-and-mortar store, or an e-commerce business, a business license is usually necessary for those learning how to sell online.
Do I need a seller’s permit to sell online?
In most cases, the same goes for a seller’s permit. If your online business is selling things that need to be taxed, you need this permit.
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This article, "Do You Need a Business License to Sell Online?" was first published on Small Business Trends
