Do You Need a Business License to Sell on Etsy?

Do you need a business license to sell on Etsy? Etsy itself doesn't require one, but your city, county or state might, because business licensing in the US is set by local and state governments, not by the platform you sell on. So the honest answer is: you can open a shop without a license, but you still need to check what your own location requires once you start selling.

The good news is that for most small Etsy sellers, the paperwork is modest and inexpensive. Below we cover which licenses and permits commonly apply, how Etsy's sales tax collection changes the picture, when a DBA or LLC matters, and how to find your local rules. This is general information for US sellers, not legal or tax advice.

Does Etsy require a business license?

No. Etsy's shop-opening process asks for a bank account for deposits, a card for fees and identity verification, not a business license. According to Etsy's help center, new sellers verify their identity with a government ID and a selfie, and the bank account name must match the legal and tax details given when opening the shop.

But "Etsy didn't ask" isn't the same as "you don't need it". Selling on Etsy doesn't exempt you from the rules that apply to any business where you live. As the SBA puts it, most small businesses need licenses or permits from more than one level of government, and you have to research your own state, county and city rules.

If you're still choosing what to sell, it helps to know that digital-only shops usually face fewer product rules than food, toys or cosmetics. Our guide to selling digital products covers that lower-paperwork path in full.

Which licenses and permits might apply to an Etsy shop?

The most common ones are a local business license, a DBA registration, a state sales tax permit and, for home-based work, a home occupation or zoning permit. Which ones you need depends on where you live and what you sell.

The SBA notes that federal licenses are only needed for activities regulated by a federal agency, and that zoning rules can apply even to home-based businesses.

Do you need a sales tax permit if Etsy collects sales tax?

Often not for your Etsy sales alone, but it depends on your state and on whether you sell anywhere else. Etsy calculates, collects and remits US sales tax on orders to buyers in states with marketplace facilitator laws, according to its sales tax help page.

How states treat the sellers behind those sales differs. California is a clear example. Its tax agency, the CDTFA, says a marketplace seller isn't required to register for a seller's permit if all of its retail sales are facilitated by a marketplace that is registered with the state. Any sales outside a registered marketplace may create a registration requirement.

That means you may need a permit if you:

• Sell at craft fairs, markets or pop-ups, where Etsy isn't involved.
• Sell through your own website or social media checkout.
• Live in a state that requires marketplace sellers to register anyway.

To check, visit your state's department of revenue website. The SBA also points sellers there to find out whether they need a state tax ID number.

Do you need a DBA or an LLC to sell on Etsy?

Neither is required by Etsy. A DBA matters when you sell under a name other than your own, and an LLC is an optional choice about liability.

DBA

The SBA says that if you do business under your own legal name, you won't need to register anywhere as a sole proprietor. If your shop operates under a different name, such as "Maple Lane Prints", you might need to register a DBA, also called a trade name, fictitious name or assumed name, with your state, county or city. Registration is usually inexpensive, and a bank may want it to open a business account in that name. If you haven't settled on a name yet, our guide to choosing Etsy shop names covers Etsy's rules and trademark checks.

LLC

An LLC can separate your personal assets from business liabilities, which matters more for physical products that could injure someone than for a printable planner. It also adds state filing fees and yearly paperwork. The SBA notes that not registering a business entity can mean missing out on personal liability protection and some legal and tax benefits. Many sellers start as sole proprietors and form an LLC once sales justify it; an accountant or attorney in your state can tell you if it makes sense for you.

Do certain Etsy products need special permits?

Yes. Food, children's products and personal-care items carry rules that apply no matter how small your shop is. These are separate from a general business license.

• Food. The FDA says home-based food businesses must learn the regulations of the FDA and their state and local health department, and that licenses or permits vary by product. Many states have cottage food laws with limits on what you can make at home and how you can sell it, including whether you can ship it.
• Children's products. Toys, children's clothing and other items designed mainly for children 12 or younger, as the CPSC defines children's products, need a Children's Product Certificate in the US. The CPSC says a certificate is always required, even for registered small batch manufacturers, and many items also need third-party lab testing.
• Cosmetics, soaps and skincare. These have federal labeling and safety rules, plus state rules in some places. Check before listing.
• Candles and items with safety risks. Labeling and warnings may apply.

If any of these are on your list, our overview of the best things to sell on Etsy explains which categories carry the fewest legal hurdles.

What about taxes on your Etsy income?

A license and income tax are separate: whether or not you need a license, your Etsy profit is taxable income.

• The IRS says you must file a return if your net earnings from self-employment were $400 or more.
• Payment platforms send a Form 1099-K when payments exceed $20,000 across more than 200 transactions, but the IRS is clear that you must report your income even if you don't receive one.
• Keep records of sales, Etsy fees, materials, shipping and other expenses from day one. Our breakdown of how much it costs to sell on Etsy lists the fees you'll want to track.

For how taxes differ between downloads and shipped goods, see digital vs physical products.

How do you find out what your state and city require?

Start local and work up: your city or county first, then your state's business and tax agencies. A practical order:

1. City or county clerk, or business licensing office. Ask whether a general business license or home occupation permit applies to an online shop run from home. Many have the answer on their website.
2. Secretary of State. The SBA suggests visiting your Secretary of State's website for state permits and licenses, and it's usually where DBAs and LLCs are registered.
3. State department of revenue. Check whether you need a sales tax permit, given Etsy's marketplace collection and any sales outside Etsy.
4. Health department or product regulators, if you sell food, children's items or personal-care products.
5. Free local help. SBA resource partners, such as Small Business Development Centers, offer free or low-cost guidance.

Write down what you checked and when. Rules change, and having a record helps if a question comes up later.

What if you sell on Etsy from outside the US?

The same principle applies: Etsy doesn't license you, your local and national rules do. In the UK, Canada and Australia, registration usually ties to tax authorities (HMRC, the CRA and the ATO) and to local council or provincial rules, and sales tax, VAT or GST registration has its own thresholds. Check your government's official small business pages before you start.

Next steps

• Get the numbers right before you register anything with how much it costs to sell on Etsy.
• Going digital to keep things simple? Follow how to sell digital products on Etsy.
• For the full method, from product to traffic, see our guide on how to sell digital products online.
• Weighing other options? Read our guide to making money online.