Do I Need a Business License to Sell Online? Legal Checklist

This is not legal advice. It summarizes official US federal, state and EU guidance as checked in October 2026. Rules vary by state, county and city and change often, so check with your state and city, or a licensed attorney or tax professional.

Do You Need a Business License to Sell Online?

Usually yes, though not a special one. No federal license covers online selling itself, but the SBA says most small businesses need a combination of licenses and permits, and an online store is a small business. Typically that means a local or state business license, plus a sales tax permit if you sell taxable goods.

Licensing follows where your business is based, not where your customers are. The SBA says local licenses "depend on your business activities" and location. In Washington, for example, you need a state business license if your gross income is $12,000 a year or more, if you sell products that require collecting sales tax, or if you trade under a name other than your own (Washington Department of Revenue).

Working from home does not exempt you: zoning ordinances "can still apply even to home-based businesses," the SBA notes. Start with your state's business portal, then your city or county clerk.

What Is the Legal Checklist for Starting an Online Store?

Work through seven stages in order: choose a business structure, get your licenses and permits, apply for an EIN, register for sales tax, publish your store policies, check product-specific rules, and set up recordkeeping. Each stage below links to the official source, and several of the registrations cost nothing at all.

Stage	What to Do	Where	Cost or Threshold
1. Business structure	Pick sole proprietorship, LLC or corporation; register an LLC, corporation or trade name	Secretary of State	Usually under $300 to register (SBA)
2. Licenses and permits	General business license; zoning or home occupation permit; federal license only for regulated goods	City, county, state	Set locally
3. EIN	Apply online	IRS.gov only	Free (IRS)
4. Sales tax	Seller's permit at home; register elsewhere once you pass each state's threshold	State tax agency or SSTRS	$100,000 in 41 states (SSTGB)
5. Store policies	Privacy policy, terms, refund policy, shipping policy	Your website	Free generators below
6. Product rules	Children's products, textiles, cosmetics, alcohol and other regulated goods	CPSC, FTC, FDA, TTB	Depends on the product
7. Records	Keep sales, expense and tax records	Your files	3 years in most cases (IRS)

Step 1: Which Business Structure Should You Choose?

For a new online store, the usual choice is between a sole proprietorship and a limited liability company. A sole proprietorship needs no state registration if you trade under your own name, but you are personally liable for business debts. An LLC requires a state filing and, in most cases, protects your personal assets from business liabilities.

In the SBA's words, a sole proprietor "can be held personally liable for the debts and obligations of the business," while "LLCs protect you from personal liability in most instances." Most states require you to register a DBA, or trade name, if you sell under a store name. LLCs and corporations register with the state and name a registered agent, and "the total cost to register your business will be less than $300" in most cases (SBA). Form the LLC before you apply for an EIN, and use our ecommerce business plan guide to match the structure to your plans.

Step 2: Which Licenses and Permits Does an Online Store Need?

Plan for up to three layers: a federal license only if your products are federally regulated, a state or local business license depending on where you are based, and a sales tax permit if you sell taxable goods. Home-based sellers may also need a zoning or home occupation permit from their city or county.

Federal licenses apply to a short list of activities. The SBA lists alcohol (TTB and local alcohol boards), firearms and ammunition (ATF), agriculture such as importing plants or animal products (USDA), wildlife products and broadcasting, among others. A store selling candles, clothing or art prints needs none of them. State and local licenses set their own fees and renewal dates, so calendar the renewal as soon as the license arrives.

Step 3: Do You Need an EIN to Sell Online?

The IRS says you generally need an EIN to hire employees, operate a partnership or corporation, or pay sales and excise taxes. Even when it is not strictly required, an EIN is free, is issued immediately online, and gives you a business tax ID to use on supplier, bank and payment forms.

Apply only at IRS.gov. The IRS warns "Beware of websites that charge for an EIN," because "You never have to pay a fee for an EIN." If you are forming an LLC or corporation, register it with your state first, or the application may be delayed.

When Will You Get a Form 1099-K?

Payment apps and online marketplaces must send a Form 1099-K when your payments for goods or services exceed $20,000 across more than 200 transactions (IRS). The One, Big, Beautiful Bill "retroactively reinstated" that threshold, so it applies to 2025 and 2026 reporting (IRS, October 2025). Card processors report with no minimum (see how to set up payment gateways), and states may set lower thresholds. Either way, "All income, no matter the amount, is taxable unless the tax law says it isn't," even without a 1099-K (IRS Form 1099-K FAQs).

Step 4: Do You Need a Sales Tax Permit to Sell Online?

Yes, if you sell taxable goods in a state where you have nexus, and a business based in a state has nexus there. A sales tax permit, often called a seller's permit, lets you collect tax legally. California requires one even for internet sales and charges no fee for it, though it may ask for a security deposit.

In California you are "generally required to register" when you sell tangible goods, and "this applies even if your sales are made through Internet auction houses" (CDTFA Publication 107). The exception is occasional sales: no more than two in a 12-month period. Asked whether there is a fee, the CDTFA answers "No," though it "may require a security deposit" (CDTFA). Once you know a rate, our sales tax calculator works out the tax on any order.

Do You Need a Resale License to Sell Online?

A "resale license" usually means a resale certificate. With a seller's permit, you can give suppliers a resale certificate to buy inventory for resale without paying sales tax. Use it only for stock: in California, misuse can bring back tax and interest, permit revocation, a possible misdemeanor charge, and a penalty of "10 percent of the tax or $500, whichever is greater" per purchase (CDTFA).

When Do You Have to Collect Sales Tax in Other States?

You must collect a state's sales tax once you have nexus there, either through physical presence such as inventory or staff, or through economic nexus by passing its sales threshold. Since South Dakota v. Wayfair in 2018, states can require remote sellers to collect, and 41 states set that threshold at $100,000 in annual sales.

On June 21, 2018, the Supreme Court held that the physical presence rule of Quill "is unsound and incorrect" and overruled it (South Dakota v. Wayfair). The case concerned a South Dakota law covering sellers that delivered more than $100,000 of goods or services into the state, or made 200 or more separate transactions, each year. South Dakota dropped the transaction test effective July 1, 2023 (South Dakota DOR).

Example State	Sales Threshold	Transaction Test	Measured Over
South Dakota	More than $100,000	None since July 1, 2023	Previous or current calendar year
New York	More than $500,000	And more than 100 sales; both must be met	Preceding four sales tax quarters
California	More than $500,000	None	Preceding or current calendar year
Texas	More than $500,000	None	Preceding 12 calendar months

Physical presence counts no matter how little you sell: South Dakota's minimum thresholds "do not apply" to businesses with a physical presence there (South Dakota DOR). If your inventory sits in another state's warehouse, ask a tax professional whether that creates presence. Rates and taxability also vary by state and locality, so track sales by state every month.

To register in several states at once, the Streamlined Sales Tax Registration System is "a simple and free system" covering the 23 full member states (SSTGB). If you should have been collecting already, the Multistate Tax Commission's voluntary disclosure program lets you file back returns "in return for waiver of penalty" for the look-back period, confidentially until an agreement is signed (MTC).

Do You Need to Charge VAT When Selling to Europe or the UK?

Yes, for most consumer sales. Since 1 July 2021 the EU charges VAT on all imported goods, after removing the exemption for consignments up to €22. Non-EU sellers can collect it at checkout through the Import One-Stop Shop for goods up to €150. The UK requires overseas sellers to charge VAT on consignments of £135 or less.

The Import One-Stop Shop (IOSS) covers "distance sales of low value goods not exceeding 150€" (European Commission). With IOSS you charge VAT at checkout and file one return, but a seller established outside the EU "needs to appoint an intermediary" unless it ships only from a country with an EU mutual assistance agreement, such as Norway (European Commission). Without IOSS, VAT is collected at import rather than at your checkout. For EU-based sellers, the wider One-Stop Shop applies an EU-wide €10,000 threshold before cross-border consumer sales switch to the customer's country VAT (European Commission).

In the UK, the £135 limit applies to the whole consignment. For goods outside the UK sold directly to UK customers at or below it, "The seller must charge and account for VAT at the point of sale," which means registering for UK VAT (HMRC). For duties, customs and market choice, see our guide to selling internationally.

Step 5: Which Policies Does Your Online Store Need?

Publish four policies: a privacy policy, terms and conditions, a refund policy and a shipping policy. A privacy policy is effectively mandatory, because California requires one from any commercial website that collects personal information from its residents. Your shipping promises are also regulated by the FTC's Mail Order Rule.

Privacy Policy

Under the California Online Privacy Protection Act, an operator of a commercial website that collects personally identifiable information about California residents "shall conspicuously post its privacy policy" (California Attorney General). Keep it true, too: the FTC tells businesses to "reread your privacy policy to make sure you're honoring the promises you've pledged" (FTC). Start with our privacy policy generator; for Europe and larger California audiences, see our guide to GDPR and CCPA compliance.

Terms and Conditions

Terms and conditions are your contract with buyers: ordering and payment, pricing errors, intellectual property, limitation of liability, dispute resolution and governing law. Our terms and conditions generator produces a first draft to adapt.

Refund Policy

State your return window, the condition items must be in, who pays return shipping, and how refunds are issued, then follow it exactly. When you cancel an order you can't ship, the FTC requires a prompt refund: "within seven working days after the order is cancelled" for most payment methods, or within one billing cycle if you extended the credit yourself (FTC). Use our refund policy generator and our return and refund policy guide.

Shipping Policy

The FTC's Mail, Internet, or Telephone Order Merchandise Rule says you need a reasonable basis to ship within the time you state, or within 30 days if you state none (50 days if the buyer applies for credit with you). If you can't ship on time, seek the buyer's consent to the delay or refund the order (FTC). Write times you can hit with our shipping policy generator and our shipping and fulfillment guide.

Step 6: Do Your Products Need Special Licenses or Labels?

Some products carry their own rules on top of your general licenses. Children's products need third-party testing and a certificate, clothing and textiles need fiber and origin labels, cosmetics may need FDA registration, and alcohol, firearms and other federally regulated goods need a federal license. Check your category before you list anything.

• Children's products: makers and importers of products designed primarily for children 12 or younger must issue a Children's Product Certificate based on tests by a CPSC-accepted third-party lab (CPSC).
• Clothing and textiles: labels list fiber content, country of origin and the maker's name or RN number, and online listings must disclose country of origin (FTC).
• Cosmetics: manufacturers register facilities with the FDA every two years and list each product, updated annually. Certain small businesses are exempt, except for products such as eye-area items or those meant to last more than 24 hours (FDA).

Step 7: What Records Should an Online Store Keep?

Keep records of every sale, expense, refund, tax collected and return filed for at least three years, the IRS's general rule. Keep them six years if you fail to report income worth more than 25% of the gross income on your return, seven years for bad-debt claims, and employment tax records for at least four years.

The IRS also says to keep records "indefinitely if you do not file a return." Keep order and payout reports, processor statements and 1099-K forms, receipts for inventory and supplies, sales tax returns for every state, resale certificates, and dated copies of your policies. LaunchMyStore includes business analytics from its Starter plan; whichever platform you use, file your sales and tax reports alongside your bank statements.

What Changes When You Sell on Etsy, Amazon or Other Marketplaces?

Marketplaces take some tasks off your plate but not your legal responsibilities. They usually collect sales tax on the sales they facilitate, they send a Form 1099-K once you pass $20,000 and 200 transactions, and under the INFORM Consumers Act they must collect and verify identity and tax details from high-volume sellers.

A high-volume seller under that act has 200 or more separate sales of new or unused products and $5,000 or more in gross revenue in any continuous 12 months during the past 24. Marketplaces must collect and verify your bank, contact and tax ID details and have you recertify yearly; at $20,000 or more in annual revenue on a marketplace, some details are shown to buyers (FTC).

Marketplace tax collection has limits too. In New York, marketplace sellers are "not responsible for collecting" tax on sales a marketplace facilitates, yet a New York-based seller still needs a Certificate of Authority and must file returns (New York Tax Department, January 2026). Sales through your own store are always yours to tax and report.

Pro Tip: Put a short monthly review on your calendar: sales by state against each threshold, permits due for renewal, and whether your shipping and refund policies still match what you actually do. For the wider launch sequence, follow our step-by-step launch guide.