Why You Need a Business License for an Etsy Store

Why You Need a Business License for an Etsy Store

If you want to sell your wares online but don’t want to pay start-up costs or deal with inventory requirements then Etsy is the way to go. It is a simple way to sell your items online. There are tons of people on Etsy who are interested in buying your wares. But what many Etsy sellers fail to realize is that they may need a business license or permit to sell their items on their Etsy store. It depends on what state and county you are in at the time you are selling on Etsy. Read on to find if you need to file for a business license or permit in your state.

Introduction to Etsy

Etsy specializes in handmade goods whether they are physical or digital. You don’t need any previous retail experience to start selling or open an account. Etsy has a community with over 1.7 million active users and 28.6 million active buyers. In 2016 alone Etsy received over $2 billion in gross sales. Another reason people love selling on Etsy is that you don’t need to create your own website. You open an account, upload pictures of your items, and start selling. It’s that easy. But many sellers don’t realize that even if they see it as a hobby your state may not. Some states require you to pay taxes on your sales.

Legal Considerations for Etsy Sellers

If you want to avoid paying any fines or fees comply with local laws regarding selling on Etsy. Even if you only see it as a hobby that you do for fun in your spare time your state or county may require a business license. Most states require sellers to collect sales tax. Sales tax and use tax can be complicated depending on the state you are in. There are only 6 states that don’t charge sales tax. Depending on local regulations you may need to collect local sales tax as well.

When it comes to physical and digital goods tax and licensing laws aren’t always equal. Some states only collect sales tax on physical goods only. Others collect sales tax on both. Check with your area to determine what the law says on physical and digital goods. If you registered your Etsy business under a name different than your own you may need to register a Doing Business As. Even if you don’t need to be licensed you may still need to register as DBA with your state.

Selling on Etsy

You may need to be certified if you plan on selling food on Etsy. Certification may be required through your local Health Department to sell food online. The US Food and Drug Administration can help you find out what the requirements are for sellers in the US. If you only sell on Etsy for fun whether you need a license or not depends. The IRS, however, requires that you report every penny that you receive during the year. Regardless if you received the money through a hobby or not they require you to report it. Each state is different as well. To find out if you need one check with your state.

The business side of Etsy can be a little complicated. But don’t let that discourage you from pursuing your passion. Make sure to follow your local laws regarding licenses, permits, and taxes.

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