So if you are merely engaging in a hobby, you do not need a business license. I used to sell on Mercari, Facebook marketplace, and poshmark. Like an LLC, a corporation protects personal assets from business liabilities. Do not sell or share my personal information. Starting 2022 the threshold drops to $600. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Your citys business license department will, of course, be specific to your location, so you'll need to locate the office on your own to obtain this type of license. Find her at danasitar.com. At the same time, it may enable you to purchase certain products from suppliers without paying sales tax. Often, the marketplace facilitator bears the responsibility for collecting sales tax on behalf of the seller. Your Etsy shop is either a business or a hobby. As e-commerce grows, many are wondering if you need a business license to sell online. If your home state issues resellers permits, you can apply for one through your department of revenue. Again, consulting your legal resources and local business resources will help you determine your exact timeline. This is what many people mean when they say business license. This is a license that lets you do business in your state or locality. This happens through whats called a resale certificate, which shows that the products that youre buying will be sold through your store either wholesale or retail. However, Etsy may handle the sales tax obligation for you. As you might expect, this differs from state to state as sales tax differs from state to state as well. How can you tell if you need a sellers permit vs business license? We believe everyone should be able to make financial decisions with confidence. You wont be surprised to hear this: Your local jurisdiction will determine what kind of licenses you need to sell online. If it is a hobby, no license is necessary. Permits are generally narrower in scope than licenses, applying to a specific activity or event. Join. NerdWallet strives to keep its information accurate and up to date. Here is a list of our partners and here's how we make money. The majority casual / clean out my closet seller are likely operating at a loss anyway; making it moot. Etsy, Amazon, and other marketplace retailers don't require sellers to hold a business license. Licenses and permits are different names for the same thing: permission from a government authority to own or do something, usually in exchange for a fee. In most cases, you will need a business license to sell crafts. But even though you don't need a business license to form an LLC, you probably need one to operate the LLC as a business. Please note that the IRS encourages that you use your SSN. We'll send you a reminder when it's time to submit your tax identification information. TermsPrivacyDisclaimerCookiesDo Not Sell My Information, Begin typing to search, use arrow keys to navigate, use enter to select, Please enter a legal issue and/or a location, Begin typing to search, use arrow Every business owner should check to see if they need a fire department permit. A business license is a requirement for online selling and its a crucial part of establishing your business as legitimate and legal. Elizabeth Gonzalez is a legal and regulatory expert writing for The Ascent and The Motley Fool. Make sure you have information about your business entity type, any required inspections or permits that are specific to the products youre selling, the name youll be operating under and, in some cases, an EIN. However, this does not influence our evaluations. Pre-qualified offers are not binding. You can obtain an EIN through the IRS online. If you're wondering "Do I need a business license to run an online business?" This is a fairly common license, especially for businesses that are shipping from home. Depending on your business, you may need to apply for licenses and permits from multiple levels of government. The Motley Fool has a. 1. And that's not a bad thing. You'll need to get a federal license or permit if your business activities are regulated by a federal agency. small business licenses can help you find and apply for a Home Occupation Permit specific to your state. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free. We make business formation EASY. An EIN is crucial for every business. As a good rule of thumb, any business involving wildlife should check in with the U.S. In most of these states, however, the requirement applies to businesses with taxable sales of at least $100,000 or 200 transactions within the state. Others are silent on the specifics. Mining, drilling, and nuclear energy: If your business is involved in drilling natural gas, oil, or other natural resources, you probably need to have a drilling permit from the government to actually do so. But operations that serve the publicthink restaurants, retirement homes, hotels, day-care centers, gym studios, etc.definitely will need this license to start their business. You'll also want to check licensing authority websites. This being said, the business licenses and permits on this list may be required by your local, country, or city governments, so you'll want to be sure to check for each type at the appropriate government office. 2022 Patent 5.Tax Registration Certificate for "Value-Added Tax" 6. Various types of business licenses are issued by federal, state, county and municipal agencies. If youre a. , speak with your lawyer and accountant about the best way to set up your business. This verification is also necessary to ensure that the 1099-K information associated with the Mercari seller account is properly reported to the tax authorities. That is sole proprietorship, corporation, limited liability company (LLC), or other business entity. Updated Aug. 5, 2022 - First published on May 18, 2022. by Elizabeth Gonzalez | Starting a home-based business can be a great way to bolster your finances or find financial freedom. Or, if youre in the business of nuclear energy, you'll need to apply for a, business license with the U.S. Nuclear Regulatory Commission, Radio and television: If your business broadcasts information over the radio, television, satellite, or cable services in the U.S., check in with the. In most states, forming an LLC doesn't require a business license, but you'll need to follow your state's procedures. Alaska, Delaware, Nevada, Tennessee, and Washington issue statewide general business licenses. Depending on how your state processes business licenses, you may need to include your federal tax ID number on your business license application. She has written hundreds of articles on legal, intellectual property and tax issues affecting small businesses. This app sets itself apart by restricting in-person meetups and requiring that sellers ship the merchandise to buyers. Thank you for being a part of our community as we continue to improve your Mercari experience. If you're unsure whether your business needs an EIN, you can consult the IRS guidelines on their website. If I'm on Disability, Can I Still Get a Loan? To list an item, you'll need to: Click "Sell." Upload up to 12 photos of the item you want to list. Gonna need a new bookcase lol. Transportation and logistics: This federally regulated business practice might apply to a number of different small business owners, so its worth paying attention to. Use the number to open a business bank account, get lines of credit, or file business taxes. One additional thing to note: In some states, such as California and Idaho, there are whats called . If youve already obtained your local business license, then you know the general gist of what a state small business operating license is. You will receive the following documents: 1. Business Registration Certificate 2. Stay up-to-date with how the law affects your life. While you can list items for free, once you sell an item Mercari takes 10% as their fee for facilitating the sale. Firearms, ammunition, and explosives: If youre in a business that manufactures, deals, and imports firearms, ammunition, or explosives, you need different licensing before you start your business. The time it takes to process your license will vary, depending on the type of business entity you are creating. On the other hand, being fully licensed and having all of your certifications in order demonstrates your professionalism and prepares your business to get out there and grow. If you plan to sell a product or service you must acquire a sales tax license, according to FindLaw. Our opinions are our own. I learned from the tax guy and do my own taxes every year. On a business license application, you indicate your corporate status. What kinds of licenses do you need to run an online business? If youre not eligible for a social security number, you can provide an Individual Tax ID Number (ITIN). A Home Occupation Permit essentially just shows that by operating your business out of your home, you arent significantly adding traffic, noise, or harmful environmental conditions to your area. For example, to reduce the threat of identity theft. Determining which business licenses you need to sell online, How to apply for an online business license. | Merchant Fees Charge to Buyer (any separately stated merchant fees charged to the Buyer, such as Zip or other payment financing fee). What do you need to apply for a business license? Between Barnes & Noble closing and having a 40 percent off everything sale and discovering a cheap LN website, this is my latest haul. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. Once you've started your business under the appropriate licenses, you'll also want to display your licenses properly, make copies for your records, and keep track of any renewal dates to ensure you're always operating legallyand of course, to avoid possible fines or penalties. Once youve gone through this process, your W-9 will be saved in your account so you can easily update and/or confirm your information each year. All other businesses need a federal Employer Identification Number (EIN), which you can obtain online in minutes from the Internal Revenue Service. Therefore, even if youre a home-based business owner, you still likely need to have the following if applicable: Professional and trade licenses for certain industries, Health, safety, and environmental permits. you will have three business days to send the item. You also can use the. Not sure exactly how you'd file for online sales though, I'm sorry! To see if Etsy collects sales tax in the states you sell in, refer to theirWhere Etsy Collects and Remits State Sales Tax guide. Many or all of the products featured here are from our partners who compensate us. By the end of 2020, over five million sellers were using Etsy. Check to see if any of your business activities are listed here, and then check with the right federal agency to see how to apply. Agriculture: If your business involves importing or transporting animals, animal products, biotechnology, etc., you need to apply for a. If youre operating out of your home, which is common for many online sellers, you may need a home occupation permit. Having a physical presence, a home-based office or . So far, we've discussed the possible types of business licenses needed to start your business in a commercial space. A federal trademark is important if your business will do business across state lines. Premium. However, an EIN is not required for all businesses. Industry-specific licenses may have a more complicated application process. For example, some municipalities require home-based businesses to get a home occupation permit or certificate of occupancy. Fish and Wildlife Service to see what exact permits they need. If youve previously used another name and youd like to change it, its especially important that you look into it. If you sell through a third party, be sure to check each states provisions for marketplace facilitators. 7 min read In an effort to maintain a level of accountability, marketplaces such as Mercari have been updating their W-9 requirements for sellers. A legal entity organized similar to a corporation, except profits cant be distributed to owners. OK92033) Property & Casualty Licenses, NerdWallet | 55 Hawthorne St. - 11th Floor, San Francisco, CA 94105. No. If you have employees, you will need to register for employer withholding tax in the jurisdictions where they work. Our experts love this top pick,which featuresa0% intro APRuntil 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee. The advantage to asole proprietorshipis that there is little paperwork to do. Before joining NerdWallet, he served as senior editorial manager of QuinStreet's insurance sites and managing editor of Insure.com. You will then pay a fee to renew your business license each year. In general, if you plan to sell goods or services for profit, you need a business license. You obtain these licenses through the relevant licensing board in your state. With some exceptions, here are the main types of business licenses and permits you'll need to secure with your local or city government to start your business. Look for resources from your state or your local SBA office that gather all the information you need in one place, so you dont have to spend hours researching every relevant agency. . Etsy's seller policies do not require you to have a business license to sell on their platform. 15 days ago. As with other pieces of the process, when you should apply for a business license to sell online will vary depending on where youre selling. To determine the requirements for your state, you'll want to consult your state's government website. Many states have specific provisions for third-party sellers, also called marketplace facilitators, such as Etsy and Amazon. Fortunately, not all small businesses have to worry about licenses at the federal level, but some in certain industries do. Dealing with the licenses you need probably will not be your favorite part of business ownership, but once you've taken care of this essential step, you can move on to the other, more exciting aspects of launching and growing a successful small business. In some states, you must obtain a business license from the state, but in others youll need a business license from your city or county. A permit from your fire department is especially necessary if your business uses flammable materials. But the drawback is that you need to apply for a business license. While the process of registering your business name on a state level is usually fairly easy, registering for a trademark is trickier. What do you need to sell on Mercari? Mining, drilling, and nuclear energy: If your business is involved in drilling natural gas, oil, or other natural resources, you probably need to have a drilling permit from the government to actually do so. Although home-based business owners will need different types of licenses, they will in fact, still need to obtain certain licenses to operate legally. For example, they look at the time and effort you spend on the activity. Which types of business licenses you need depends on federal, state and local requirements and what kind of business you run. Our partners compensate us. Do You Need a Business License To Sell on Etsy. Do You Need a Business License to Sell Online? Best Homeowners Insurance for New Construction, How to Get Discounts on Homeowners Insurance. The licenses you need also may depend on the types of products that youre selling. Not only does getting a business license and several other required permits give your business credibility, but its also required to operate legally and establish your company. Alcohol: You need a business license from the federal government along with your state business license if youre selling alcohol as a part of your business. Third Party Networks (such as our Mercari marketplace) use IRS Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, to obtain tax identification information from individuals and sellers who receive reportable payments stemming from marketplace transactions during the calendar year. so its up to you entirely if you want to choose to pay taxes on anything less than that. need a Home Occupation Permit as their small business license. Some jurisdictions impose sales tax on services, while others do not. Some of them will not apply directly to you, but its essential to know about all of them so you can make certain you have the right operating paperwork before you start selling online. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. Dana has taught journalists, writers and editors how to write for the web through Utah Valley University, Queen's University at Kingston, ACES: The Society for Editors, the National Association for Independent Writers & Editors, online courses and private trainings. When investigating license requirements, look for specific stipulations that apply to your business type. Typically, your W-9 should be updated when a life event has occurred that affects your tax reporting information. However, sole proprietorships and partnerships may still need to register DBAs and obtain business licenses from government agencies. Business license requirements vary by jurisdiction for a home-based or online business. Many state websites provide the opportunity to sign up for email notifications. In terms of soap businesses, this happens often if you sell online. Click here to read our full review for free and apply in just 2 minutes. In other areas, you may need to grow to a certain size before youre required to obtain licenses and permits. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site. Sales tax license, especially for businesses that are shipping from home marketplace facilitator the. License requirements vary by jurisdiction for a home Occupation permit or Certificate of occupancy for a business.... Permit from your fire department is especially necessary if your business license sell... 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