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Do I need a business license to sell online? What US sellers need from the city, the state and the IRS

· 12 min read · Legal & Tax

Short answer: In the US, there's no single federal "license to sell online," but most online sellers still need something. Depending on where you live, that's usually a general business license from your city or county, a seller's permit (sales tax permit) from your state if you sell taxable goods, and a DBA registration if you sell under a store name instead of your own legal name. Some products, such as alcohol, firearms or certain animal and plant products, also need a federal or state license. Selling from home doesn't exempt you, and even hobby sales must be reported to the IRS. The good news: many of these registrations are free or cheap, and you can check all of them in an afternoon before you set up a store platform that takes no transaction fees on your sales.

"Business license" usually means four different things

When people ask whether they need a business license to sell online, they're often asking about four separate registrations, issued by different offices:

  • General business license — Who issues it: Your city or county; When you need it: Depends on local rules; many places require one for any business, including home-based ones
  • Seller's permit (sales tax permit) — Who issues it: Your state tax agency; When you need it: When you sell taxable goods and are engaged in business in that state
  • DBA (trade name) — Who issues it: Your state, and in some places your county or city; When you need it: When you sell under a name other than your own legal name
  • Industry license or permit — Who issues it: Federal or state agency for that product; When you need it: When what you sell is regulated, such as alcohol or firearms

You may need none, one, or all four. The rest of this guide walks through each.

1. A local business license from your city or county

The SBA notes that states regulate a broader range of activities than the federal government, and that retail is among the activities commonly regulated at state or local level. The licenses you need from your county or city depend on what you do, and local governments set their own registration, licensing and permitting rules.

For online sellers this matters because your "place of business" is often your home. The SBA points out that zoning ordinances can still apply to home-based businesses, even if there are fewer restrictions.

What to do: search your city's website for "business license" or "business tax registration," and check your county's website too if you live outside city limits. Fees vary by place and business type, so check the current amount locally. Note the renewal date: the SBA warns that some licenses and permits expire after a set period.

2. A seller's permit from your state

This is the registration online sellers most often miss. If you sell physical products that are taxable in your state, you generally need to register with the state tax agency so you can collect and pay sales tax. States call it a seller's permit, sales tax permit or sales tax license. Two examples from the state agencies themselves:

  • California: according to the CDTFA, you must get a seller's permit if you're engaged in business in California and intend to sell or lease tangible goods that would ordinarily be subject to sales tax at retail. That applies to individuals as well as corporations, partnerships and LLCs. There's no charge for the permit, though the CDTFA may ask for a security deposit depending on your type of business and expected taxable sales. You apply online at cdtfa.ca.gov.
  • Texas: the Texas Comptroller says you need a sales and use tax permit if you're engaged in business in Texas and sell or lease taxable goods or services there. There's no fee, but you may be asked to post a security bond, and the permit is valid only while you're actively selling. Sellers with no physical presence in Texas get a safe harbor: if their total Texas revenue over the previous 12 calendar months is under $500,000, they don't have to get a permit or collect use tax.

Other states have their own rules and thresholds. Search "[your state] seller's permit" and use the result on the state's own .gov website, not a paid filing service. Register before your first sale, so you can charge sales tax at checkout from the start.

3. A DBA if your store has a different name

According to the SBA, if you do business under your own legal name, you don't need to register that name anywhere. Most online stores have a brand name, though, and if you sell as "Maple Street Candles" instead of "Jane Smith," most states require you to register that DBA (also called a trade name, fictitious name or assumed name). Some counties and cities require it too.

If you form an LLC instead, the LLC's name is registered with the state when you form it. We compare a sole proprietorship and an LLC in how to start an online store.

4. A license for what you sell

The SBA lists the activities that need a federal license or permit. For product sellers, the relevant ones include:

  • Alcoholic beverages: the Alcohol and Tobacco Tax and Trade Bureau, plus local alcohol control boards.
  • Firearms, ammunition and explosives: the Bureau of Alcohol, Tobacco, Firearms and Explosives.
  • Agricultural products: the U.S. Department of Agriculture, for importing or moving animals, animal products, plants and related products across state lines.
  • Fish and wildlife products: the U.S. Fish and Wildlife Service, including import and export of wildlife-derived products.

States add their own industry rules on top. If you sell food, cosmetics, supplements or anything you make in your kitchen, check your state's health or agriculture department before you list it.

Can I sell online without a business license?

You can test an idea with a few sales, but "small" doesn't mean "invisible." Two points from the IRS:

  • Hobby or business? The IRS says the line isn't clear-cut. It looks at whether you run the activity like a business, keep records, change methods to make a profit, how much time you put in, and whether you expect to make money. Once you're selling regularly with the aim of profit, treat it as a business.
  • Income must be reported either way. Even hobby income goes on your return (Schedule 1, Form 1040, line 8), and hobby losses can't offset other income. Payment apps and online marketplaces send a Form 1099-K when payments exceed $20,000 across more than 200 transactions, and card processors send one regardless of the amount. The IRS is clear that you must report your income whether or not you receive a 1099-K. If you take card payments on your own site, your payment provider reports them; we explain how that setup works in how to accept payments on your website.

Local business licenses and state seller's permits have their own rules, separate from the IRS. A tiny side business can still need both.

Check what you need in one afternoon

  1. City and county: search your city and county websites for "business license" and check the zoning rules for your address if you sell from home.
  2. State tax agency: look up your state's seller's permit or sales tax permit and register if you sell taxable goods.
  3. Secretary of State: register your DBA if you use a store name, or form your LLC if you've chosen one.
  4. Product rules: check the SBA list of federally regulated activities and your state's rules for your product category.
  5. IRS: get an EIN if you need one, and set up a simple way to track income and expenses from day one.
  6. Calendar: write down every renewal date.

How Favenda helps

Once you're registered, your store has to charge what you've promised and keep clean records. In Favenda you set shipping rates by weight or by size, add a free shipping threshold, and give each sales region its own currency, payment methods and shipping rates. For international orders, DHL Express, UPS and FedEx are built in: labels print from the order screen, a commercial invoice is created with the shipment, and tracking updates automatically. Each order shows real profit after shipping and payment costs, which makes year-end bookkeeping easier. There are no transaction fees on your sales. The Store plan is $69 a month excluding tax, with two months free when you pay annually.

See Favenda →

FAQ

How much is a business license to sell online?
It depends on where you live and what you sell. Seller's permits are free in some states, including California and Texas, though a security deposit can be requested. City and county license fees vary, and the SBA says registering a business usually costs less than $300 in total, depending on your state and business structure.

Do I need a seller's permit to sell online?
If you sell taxable physical goods and you're engaged in business in your state, usually yes. In California and Texas, for example, sellers who are engaged in business in the state and sell taxable goods must hold a permit. Check your own state's tax agency before your first sale.

Do I need a business license to sell art online?
Selling your own art is still selling goods, so the same checks apply: your city or county may require a business license, your state may require a seller's permit for taxable sales, and you'll need a DBA if you sell under a studio name. Original art isn't one of the federally licensed activities.

Sources: U.S. Small Business Administration, "Apply for licenses and permits" and "Register your business"; California Department of Tax and Fee Administration, "Obtaining a Seller's Permit" and Publication 107; Texas Comptroller of Public Accounts, "Sales and Use Tax FAQ: Permit" and "Remote Sellers"; IRS, "Understanding your Form 1099-K" and "Know the difference between a hobby and a business". All read on 24 October 2026. Rules vary by state, county and city; check with your local agencies, and an accountant or attorney, before you start selling.