Do You Need a Business License to Sell Online?

The thing nobody tells new online sellers

Here is a fact that surprises almost every Etsy and Shopify seller I talk to: roughly 80% of people selling products online have no idea they need a business license. They set up a shop, list a few products, make some sales, and assume the platform handles the legal side.

It does not. Not even close.

Etsy will not ask you for a business license. Shopify will not check. Amazon FBA will not verify that you are legally allowed to sell in your city. These platforms collect their fees and leave the compliance to you. And when your city or county comes knocking, "I didn't know" is not a defense.

I spent months digging through the actual requirements for online sellers in every state, and the short answer is: yes, you almost certainly need at least one permit. Probably two or three. Let me walk through what they are, where to get them, and what happens if you skip them.

What counts as a "business" when you sell online?

If you are selling products for profit on a regular basis, you are running a business. It does not matter if it is a side hustle. It does not matter if you only made $500 last year. It does not matter if you are selling handmade candles from your kitchen table.

The legal threshold is lower than most people think. In most jurisdictions, the moment you hold yourself out as a seller with the intent to make money, you are a business. And businesses need licenses.

There are a few exceptions. Some states exclude casual or occasional sellers. If you sell your old furniture on eBay once a year, you are probably fine. But if you have an active shop with regular listings and repeat customers, you have crossed the line into "business" territory whether you filed paperwork or not.

The three permits most online sellers need

1. General business license (city or county)

Almost every city and county in the US requires a general business license, sometimes called a business tax certificate. This is the baseline. You need it regardless of what you sell, where you sell it, or whether you have a physical storefront.

The cost is usually between $25 and $200 per year. Some cities base the fee on your projected revenue. Others charge a flat rate. Either way, it is cheap and the application is straightforward.

The catch: if you work from home, you may also need a home occupation permit. This is a separate application that confirms your city allows commercial activity at your residential address. Some cities issue these automatically with the business license. Others require a separate application and sometimes a home inspection.

2. Seller's permit / sales tax permit

If you sell tangible products, you need a seller's permit (also called a sales tax permit, resale certificate, or certificate of authority depending on your state). This permit allows you to collect sales tax from customers and remit it to your state.

The good news: seller's permits are free in most states. The bad news: the sales tax rules are a nightmare. Each state has its own rates, exemptions, and filing schedules. Some cities and counties add their own local sales tax on top. And thanks to the 2018 South Dakota v. Wayfair Supreme Court decision, you may owe sales tax in states where you have no physical presence at all, based on your sales volume.

I am not going to pretend I can explain the full difference between a sales tax permit and a business license in one paragraph. It is its own topic. But the bottom line is: if you are selling physical products online, you need a seller's permit in your home state at minimum, and possibly in other states where you hit certain sales thresholds.

Five states have no state sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. If you live in one of those, you still may need a business license, but you can skip the seller's permit for your home state. You might still owe sales tax in other states where your customers are, though.

3. Home occupation permit

If you run your online business from home, your city probably requires a home occupation permit. This exists because residential zoning was not designed for commercial use. The permit says: yes, this person is allowed to run a business from their house, and no, they are not going to turn a residential street into a warehouse district.

Home occupation permits typically come with conditions. No customer foot traffic. No exterior signage. No employees working at the residence (or a limit of one or two). No storing hazardous materials. No noise or deliveries outside normal hours. Shipping and receiving a few packages a day is usually fine. Having a UPS truck show up with a pallet every morning might not be.

Costs range from free to about $150. Some cities bundle it with the business license. Others treat it as a separate application with its own fee.

State-by-state breakdown

Requirements vary a lot by state. Here is what online sellers need in eight of the most common states for e-commerce businesses. Check our state-by-state cost guide for more detail.