Etsy is a fantastic platform where you can sell a number of different things and even make a full time living. Many people starting an Etsy shop want to know the answer to this question: Do you need a business license to sell on Etsy? What do you need business wise to get started?
Do you need a business license to sell on Etsy? It depends.
Many states require Etsy sellers to collect sales tax and pay local business taxes. Depending on your state where you do business, sales and use tax can be complicated. Etsy collects sales tax for some states but not all.
You will have to investigate your local requirements. Visit your state and local government website to find out what the tax requirements are for your area.
Is your Etsy shop a business?
Is your Etsy shop a hobby or a business? Hint: If you’re doing it for profit, it’s a business, not a hobby.
Technically as soon as you start selling and making money you are a sole proprietorship in the USA. With this business type you don’t need to file legal forms or pay any fees to start.
Depending on what you are selling and where you sell it from, you may also need to obtain certain business licenses locally.
Check your state or city requirements so you will comply with your local laws to avoid violations and fines. You can look these up by searching Google for “your city” and/or “your state” plus “business license” and reading up on what is required.
Etsy can be a very fun business, but it’s also a business. Even if Etsy doesn’t require a business license it is a best practice to treat your shop as a business from the start and get everything you need in place from business licenses to separate business bank accounts. Plan to succeed from the start!
You don’t need anything to start an Etsy shop.
So you won’t need official paperwork or an LLC in place to start an Etsy shop on the actual platform. Etsy does not require you to have a business license to open a shop. You can start a shop and start selling without anything in place.
But this does not mean you don’t need one. That depends on your plans and your location. You will want to quickly learn what you are required to have in place where you live.
This is something you will have to research on your own and consult a professional as every location will have different laws and requirements.
Check your local rules and be careful.
Make sure you follow your local rules and regulations when it comes to business licenses, permits and taxes. This is a location based issue so there is not a single answer.
I’m not a lawyer or an accountant. Please do your own research and consult a professional if you have questions (don’t rely on a YouTuber).
I run an Etsy shop and the business license requirements that apply to me locally may not apply to you and vice versa.
Below I’ve included some links to helpful posts with more information about whether or not you need a business license for selling on Etsy and also for setting up your business properly.
From Etsy’s seller handbook:
What’s the best legal structure for my business? It’s an important question, but there’s no one answer, because as your business changes, the best way to structure it also changes.
Guess what? Technically, you’re a sole proprietorship as soon as you start doing business, so that wasn’t so hard, was it?
You don’t need to file legal forms or pay any fees to launch a sole proprietorship, which is why the vast majority of small businesses start as sole proprietorships, but there are some legal issues to consider.
From Wolters Kluwer:
Etsy is available to anyone who wants to open an account. But to avoid violations and fines, you’ll want to make sure you are following state and local laws and regulations. Even if you’re only selling items occasionally and consider your venture more of a hobby than a job, the state you live in may still require a license.
Even though you’re selling online, you still may have to charge your customers sales tax. Depending on the state you’re selling from, sales and use tax can be complicated. There are only a handful of states that do not charge state sales tax.
Don’t forget to look into local sales tax as well. You may have additional taxes based on the county that you live in.
From FT Patel Law PLLC:
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.
Those are a few resources that might help you determine whether or not you need to look further into getting a business license for your Etsy shop.
How To Start An Etsy Shop
If you’re not on Etsy yet, it’s a great platform to start on and learn how to sell digital products.
If you want to start an Etsy shop in order to earn part time or full time income then this tutorial for beginners will help you get started! I know a lot of people who have never sold online before can feel intimidated which is why I created this tutorial on how to set up an Etsy shop step by step. It is very easy and seeing someone else do it makes it feel much easier!
You can start your shop with this link for 40 free listings to jumpstart your shop without having to waste money on those first listings.
Additionally, here are some posts about starting and growing an Etsy shop that may help you:
- How To Start An Etsy Shop
- What I Wish I Knew Before Starting An Etsy Shop
- Digital Product Ideas To Sell On Etsy
Mary is the founder of Pennies Not Perfection where she shares her journey to build wealth through online income. She quit her day job in 2021 after she paid off her debt and doubled her 9-5 salary.
Mary's favorite free financial tool is Personal Capital. She uses their free tools to track net worth and work toward to financial freedom.
Her favorite investment platform is M1 Finance, where she built a custom portfolio for free with no fees. She shares her portfolio growth and savings progress every month on YouTube.