Do You Need a Business License to Sell Online?

6 common types of business licenses and permits

Although the government has a document called a “business license,” there are other requirements for selling online that you must comply with before you can start your e-commerce business.

 Although some of these may not apply directly to you, it is vital that you know about them all so that you can ensure you have the right operating paperwork before you begin selling online.

1. Business License (general license)

Business licenses sometimes called “general licenses,” give you permission to conduct business within a certain geographical area – typically your city, county, or state.

Every business, whether it is online or not, will require a business license to operate. In addition to varying requirements and fees (which are usually relatively low), obtaining a business license will vary by region. Business licenses must be renewed every few years.

2. Seller’s Permit

When your company sells tax-exempt products, most states require that you get a sales tax permit – whether your store is based at a physical location or solely online. You must collect sales tax, which a seller’s permit allows you to do.

You may also be able to purchase certain products from suppliers without paying sales tax. In this case, you’ll need what’s called a “resale certificate,” which demonstrates that the products you’re purchasing will be sold either wholesale or retail through the store.

3. Sales Tax License

It is important to be able to charge customers sales tax when selling products online. It’s a requirement, not an option – meaning, you will incur fees if you don’t.

As a result, you’ll need a sales tax license. It is also expected to differ from state to state as the sales tax will vary from state to state. It is a good idea to get in touch with your local municipalities and jurisdictions where you do business.

4. Employer Identification Number

Every business needs an EIN. You can think of your employer identification number as a social security number for your business: It identifies you as a business and enables you to remain compliant with taxes and other regulations. 

This is essential if you want to incorporate as a business entity other than a sole proprietorship.

Another thing you can do with an EIN is open a business bank account. The earnings from your business need to be put into a separate business account since it is important to separate your business and personal assets.

To get an EIN, you’ll go through the IRS website.

5. “Doing business as” License

Businesses register their business name with their state when they register their business. Nevertheless, not all business entities must register, such as sole proprietorships and general partnerships. 

As a result, the name of the business is the legal name of the business.

You should look into a DBA license, however, if you don’t want to operate your business under your own name – or if you want to use a business name other than the one you registered with your state.

 By doing this, you will be able to operate under a trading name. In addition to your DBA license, if you use a different name, you will need it to execute certain contracts, such as opening a business bank account.

6. Home Occupation Permit

A home occupation permit may be necessary if you operate from your home, which is common for many online sellers. Licenses like this are fairly common, especially for businesses that ship from their homes. 

Additionally, if you’re hiring employees, you’ll likely need a home occupation permit. Different cities, counties, and states will have different rules about whether a home occupation permit is required.

Determining Which Business Licenses You Need to Sell Online

You won’t be surprised to hear that your local jurisdiction will determine what type of licenses you need to sell online. Several may require licenses and permits that are not on this list and maybe proprietary to your area. 

Check with the federal government, as well as state, county, and city governments.

Licenses may also be required based on the type of products you’re selling. If you were selling fireworks, you would need a different license than if you were selling jewelry.

There is no doubt that you need to figure out what is relevant to your business, no matter what. 

It’s always a good idea to consult with an attorney during this process to ensure you’re obtaining all of the necessary business licenses.

How to Apply for an Online Business License

You will need to follow the instructions for each individual license once you’ve determined which permits and licenses you to need for your online business. 

Different companies may have different methods of applying – some may allow you to apply online and some may require that you mail in forms or appear in person.

Remember that many business licenses expire after a certain period of time. You might even want to put a note in your calendar about the expiration dates so you don’t let your licenses lapse.