by Doug Berg |
Last Updated: September 4, 2018 So, do you need a business license to sell on Etsy?
Are you thinking of starting an Etsy shop and not sure of the rules and regulations? Do you need a business license to sell on Etsy at all? Does your business deal in physical goods that need to be shipped? Will you be manufacturing products at home?
First the obligatory disclaimer. I run a successful Etsy shop and have dealt with setting up a business entity for my own business. I am not, however, a lawyer or accountant and you should always consult these professionals before entering into business.
Ok with that out of the way, do you need a license? Well it depends.
When should you get a business license?
Etsy doesn’t ask for a business license as a condition of creating a shop. So it’s not technically required at all for the platform. If I was selling a few items a month and making less than $1000 a year, I personally wouldn’t really worry a license or permit. Your business operates more as a hobby and is probably exempt. I would of course, report my profits on my taxes, both state and federal. Once you make a thousand dollars in a year,I think it’s time to get legal and make sure you’re following your local laws.
Your local government wants your business to succeed.
Cottage industry has always existed, whether it be a local farmers market or an Etsy shop, local governments want new businesses like yours to succeed. New businesses mean new tax dollars.
There are two levels you need to check to see if you need a business license to operate.
- State
- City
State Level Licenses/Permits
There isn’t usually a permit for a home based business at the state level. What you do need to do though is contact your state Department of Revenue. This organization is responsible for the collection and distribution of sales taxes. In most cases you’ll have to file a monthly or quarterly report of how much your sales were from each tax zone in your state. The Department of Revenue collects this and then distributes the sales taxes to those districts.
Some products are exempt from tax or are taxed at a different level so you’ll need to find out from the Department of Revenue exactly what your tax responsibility is. It’s also generally the case that only physical goods are taxed, so if you’re selling digital downloads or services you’ll probably be exempt but you should still call and ask.
City Permits and Taxes
Many communities have a permit and a small fee required to operate a business. Sometimes there are thresholds of income that must be met before you are required to file. If you plan to put up signage for your business at your home or if you need to do construction to facilitate your business then you’ll also need permission from the local government.
Many municipalities also have a Home Occupancy Permit which basically allows you to run a business from your home. You’ll need to contact your local municipal government and find out what licenses are required.
Other Considerations
If it’ll be obvious to your neighbors that you’re running a business it’s probably best to check local regulations and make sure your business is not a disturbance to the neighborhood. If you own a home you should also read your homeowners association regulations to find out if you’re restricted from running a home based business.
Conclusion
Legally registering your business can be expensive and time intensive. It’s not generally worth the effort or expense unless you business is actually making money. Start your Etsy shop, make products that sell and build your business. This is how almost every business was started. Once you have some sales, reach out to city hall and find out what they require.
Do you need a business license to sell on Etsy, it’s pretty easy to find out what’s required because your local government is usually more than willing to help.
Find out more:
The Small Business Administration has great resources for new businesses, check out this article about licenses:
https://www.sba.gov/blogs/what-know-about-small-business-licenses-and-permits
