Do You Need a Business License to Sell on Etsy?

A business license isn’t something Etsy asks for when you open a shop, but it can be required by your city, county, or state once you’re operating as a real business. The practical rule is that platform signup and legal permission to sell are two separate things, and local requirements vary based on where you live, where you work (especially if it’s from home), and what you sell. Many sellers also run into related paperwork like a seller’s permit for sales tax, a home occupation permit, or extra approvals for regulated items such as food, cosmetics, plants, or kids’ products. The most common slip-up is assuming marketplace settings replace local registration.

Etsy account setup vs legal requirements in your location

What Etsy does and does not require

When you open an Etsy shop, you’re meeting platform requirements, not getting a “license to do business” in the eyes of your city or state.

Etsy typically requires things like accurate identity details, a bank account for deposits, and tax-related information so it can pay you and handle reporting when required. But Etsy does not ask you to upload a local business license as a standard step of shop setup.

What Etsy does require is that you follow Etsy’s rules and represent your shop honestly. It also makes sellers responsible for complying with laws that apply to what they sell, including required labels and warnings. That responsibility is spelled out in Etsy’s Seller Policy.

So, it’s completely possible to be “approved” to sell on Etsy while still being out of compliance locally if you skipped a permit your city expects.

What local governments can require anyway

Local and state requirements are separate from Etsy, and they vary a lot across the US. Depending on where you live and how you run your shop, you may need:

A general business license (often issued by a city or county) just to operate, even if you only sell online.

A home occupation permit or zoning approval if you’re making products at home, storing inventory, or having regular carrier pickups.

A seller’s permit (sales tax permit) if your state requires registration for sales tax, even when a marketplace collects some taxes for you.

Extra permits for certain products, such as foods, cosmetics, children’s products, plants, or items that require specific labeling.

The simplest way to think about it: Etsy handles the marketplace side, but your location can still treat your Etsy shop like any other business operating within its jurisdiction.

Business license requirements for online sellers in the US

General business license vs seller’s permit

A lot of Etsy sellers hear “license” and think it’s one thing. In the US, it’s usually two separate buckets:

A general business license (sometimes called a business tax certificate, business license, or occupational license) is a local registration that says, “I’m operating a business in this city or county.” It’s often tied to local business taxes, basic zoning checks, or just keeping a registry of businesses. Even if you sell only on Etsy and never see customers in person, your local government may still expect this.

A seller’s permit (also called a sales tax permit, sales and use tax permit, or certificate of authority in some states) is a state-level registration related to collecting and remitting sales tax. This is not the same as a business license.

Why the distinction matters for Etsy: Etsy may collect and remit sales tax in many states as a marketplace, but that doesn’t automatically cancel your need to register if your state requires sellers to have a permit for taxable sales, resale buying, or other reporting reasons. It’s common for sellers to need one, even when Etsy is handling checkout tax for buyers.

When home-based businesses need extra permits

If you run your Etsy shop from home, the “business license” question often turns into a home business compliance question.

Some cities and counties require a home occupation permit when you manufacture products, use certain equipment, store inventory, or create impacts like frequent deliveries and pickups. In addition, you might run into rules around:

• Zoning (whether your address can be used for business activity)
• Signage limits (even a small porch sign can be restricted)
• Fire safety requirements for certain materials or storage amounts
• HOA or lease rules that can be stricter than city rules

If you’re making candles, soaps, woodworking items, or anything involving heat, chemicals, or tools, it’s especially smart to check local home-based business rules before you scale up.

Business vs hobby selling on Etsy for IRS purposes

Common IRS factors that signal a business

For taxes, the big question is whether your Etsy activity is a business (for profit) or a hobby (not for profit). The IRS looks at the full picture, not one single rule. In its guidance on distinguishing a hobby from a business, the IRS lists factors such as whether you operate in a businesslike way (books and records), the time and effort you put in, whether you depend on the income, and whether you’ve shown an ability to make a profit. Those factors are summarized on the IRS “hobby or business” FAQ page about Income & Expenses.

On Etsy, “businesslike” signals often show up as practical habits: tracking costs and fees, pricing for profit, improving listings based on data, and keeping clear records of inventory and orders.

Also keep in mind: Etsy sales can trigger third-party reporting forms (like a 1099-K) depending on the year and your totals, but receiving (or not receiving) a form does not decide whether you’re a hobby or a business. Etsy explains its current 1099-K rules in the Seller Handbook article on Making Sense of Your Tax Forms.

Scenarios: hobby seller vs business seller

A hobby-style Etsy seller might sell a few items a year, price mainly to cover materials, and treat the shop as an occasional creative outlet. The income is still generally taxable, but it is not treated the same as running a profit-driven operation.

A business-style Etsy seller usually aims for consistent profit. They reinvest in supplies and marketing, track expenses, run regular drops, and adjust pricing based on labor, fees, and demand. If you’re operating like this, you’re typically looking at Schedule C reporting and potentially self-employment tax, not just “extra side money.”

Licenses and permits you might need beyond a business license

Sales tax permit and resale certificate basics

A sales tax permit (seller’s permit) is your state’s way of registering you to collect and remit sales tax when required. If you sell taxable goods and your state requires registration, you may need this permit even if Etsy collects and remits marketplace sales tax in many situations.

A resale certificate is different. It’s usually a document you give to a supplier so you can buy materials or inventory without paying sales tax, because you plan to resell the finished product and charge sales tax at the point of sale. Some Etsy sellers use resale certificates to buy packaging, blanks, or components at wholesale. Rules vary by state, and misuse can create tax problems, so it’s worth getting clear on what your state allows.

DBA, business name registration, and LLC filings

If you sell under a shop name that isn’t your personal legal name, your state or county may require a DBA (“doing business as”), also called a fictitious name or assumed name filing. This is about name transparency, not taxes.

An LLC is separate from a DBA. Forming an LLC can help with liability separation, but it does not automatically replace local licenses or tax registrations. Many Etsy sellers start as a sole proprietor and add an LLC later when revenue, risk, or partnerships make it worthwhile.

Zoning, home occupation permits, and HOA rules

Home-based Etsy shops can trigger zoning and home occupation rules, even when all sales are online. Common triggers include: storing inventory, using certain equipment, hazardous materials (like solvent-based finishes), or a noticeable increase in deliveries and pickups.

Also check your lease and any HOA rules. Even if your city allows a home business, private agreements can restrict signage, customer traffic, and sometimes business activity altogether.

Sales tax, nexus, and Etsy’s role in collecting and remitting

Economic nexus and marketplace facilitator rules

Sales tax on Etsy is shaped by two concepts that often get mixed together: nexus and marketplace facilitator rules.

Nexus is the connection that gives a state the right to require sales tax compliance. It can be “physical nexus” (you live, work, store inventory, or have employees there) or economic nexus (you exceed a state’s sales threshold into that state). The exact thresholds and details vary by state, and they can change.

Marketplace facilitator laws are why Etsy feels different from running your own website. In many states, the law puts the responsibility on the marketplace to calculate, collect, and remit sales tax on marketplace orders. Etsy explains when it automatically calculates, collects, and remits US sales tax in its Help Center article How US State Sales Tax and Fees Applies to Etsy Orders.

Even with marketplace collection, you can still have state obligations. For example, some states may want you to register or file if you have in-state presence or if you also make non-marketplace “direct sales.” States spell out these rules differently, like Nevada does in its Marketplace Facilitator/Seller FAQs.

Keeping records for state tax filings

Even when Etsy remits sales tax, keep clean records so you can prove what happened and stay consistent across filings. At a minimum, track:

• Gross sales by state (and what channel they came from)
• Sales tax collected and remitted by Etsy vs any tax you collected yourself
• Refunds, cancellations, and exchanges (these can affect taxable totals)
• Exemption documentation, if you ever handle exempt transactions outside Etsy

This is also helpful when you switch from “casual selling” to steady volume, since nexus exposure and filing frequency can change as you grow.

State and city examples for popular Etsy seller locations

California: local business tax certificates and seller’s permits

In California, Etsy sellers often deal with two separate layers: city or county registration, plus state sales tax registration.

Many cities require a local business registration even if you sell only online. For example, the City of Los Angeles requires many businesses operating in the city to register for a Business Tax Registration Certificate (often discussed like a “business license”).

At the state level, if you’re engaged in business in California and selling taxable tangible goods, you generally need a California seller’s permit through the CDTFA. You can start here: Get a Seller’s Permit.

New York: sales tax certificate of authority considerations

New York is strict about sales tax registration. If you make taxable sales, you generally must register with the NYS Tax Department and obtain a Certificate of Authority before you begin selling. New York also notes you typically should apply at least 20 days before you start doing business that requires collecting sales tax.

If you’re setting up an Etsy shop while living in New York, plan ahead so your Certificate of Authority timing doesn’t lag behind your launch. This is the main starting point: Register as a sales tax vendor.

Texas: sales tax permit and local permits

Texas does not have a statewide “general business license” in the way some states do, but you may still have registrations at the state and local level.

If you sell taxable items, you may need a Texas Sales and Use Tax Permit through the Texas Comptroller. And depending on your city, you might also run into local requirements like home occupation rules, signage limits, or other permits tied to operating from your address.

How to confirm and apply for the right licenses

Where to check: city, county, state agencies

Start with a simple goal: figure out which rules apply to (1) where you’re operating and (2) what you’re selling on Etsy.

Most Etsy sellers need to check these places, in this order:

1. Your city (or town) business licensing office: Ask if a local business license or business tax certificate is required for a home-based online seller. This is where home occupation rules often come up.
2. Your county: Some counties handle business licensing, zoning, or health-related permits (especially for food-type products), even if the city does not.
3. Your state:
   • Department of Revenue / Tax agency for a sales tax permit (seller’s permit) and sales tax filing rules.
   • Secretary of State if you’re forming an LLC/corporation, or registering a business name in your state.
4. Product-specific agencies (when relevant): Cottage food programs, local health departments, agriculture departments, and consumer product regulators can matter depending on your product category.

If you’re unsure where to begin, the U.S. Small Business Administration’s registration guide is a solid roadmap to the typical state and local steps.

Documents and details you may need

Be ready with your legal name and contact info, your Etsy shop name, your business address, a short description of what you make and sell, your estimated start date, and an estimate of yearly sales. Many applications also ask for your business structure (sole proprietor vs LLC), and may require an EIN depending on your setup.

Renewals, updates, and staying compliant

Licenses are not always “set it and forget it.” Many cities require annual renewals, and states may require periodic sales tax filings even when you owe zero. Update your registrations if you change your shop name, move, add a new product line (like food or cosmetics), or shift from occasional sales to steady volume. Keeping a simple folder with your permits, renewal dates, and Etsy monthly statements saves a lot of stress later.