E-commerce businesses are subjected to the same type of legal procedures as any other. This includes the business licenses and permits required by a business in a particular state, even if it has no physical presence there. The regulations weren’t always this stringent for online businesses, and business owners were once free from applying for these permits. However, with the ever increasing growth of e-com businesses, they are now required to apply for multiple business licenses.
Types of Licenses Needed to Sell Online
It’s crucial to remember that most business licenses are authorized by the state. In other words, different states might have different requirements for businesses operating in their jurisdiction. The same applies to the county or local licensing authorities.
On a general note, the following licenses are needed to sell online:
Federal Employer Identification Number (EIN)
The EIN of a business, also known as the federal tax ID is a nine digit number that works as an identification number for your business. This is one of the initial licenses that a business requires, and further helps you to open a business account, apply for other licenses and permits, file your tax returns, and recruit employees.
Doing Business As (DBA) Name
Whether an ecommerce store or a brick and mortar retail establishment, you need an official name for your business. You can apply for a DBA through the secretary of state office. You have to apply for this fictitious/assumed trade name only when you are not using your own name or the name of your previously established LLC to set up the new one. If you end up using your own name, you don’t have to apply for the DBA.
If you do end up applying for the DBA, remember that different states have different processes and processing fees, while some are completely free of cost.
Sales Tax License
Also known as the seller’s permit, you need this license if you indulge in the sales of taxable commodities and services in your state. Out of the 45 states that do collect sales taxes, a seller’s permit for online trading has not been mandated by all. While states like California require online businesses to apply for a seller’s permit if they’ve conducted more than 3 taxable sales in 12 months, Florida and Missouri have no such requirements.
In case you’re buying a commodity for the purpose of reselling or renting it to other consumers, you require a reseller’s permit. This permit will exempt you from paying the sales tax at the time of purchase.
General and Federal Business License
You need a general business operating license to operate the business in your state or multiple states. This one is a basic requisite.
Depending on the state laws, you might be required to apply for some specific, statewide business licenses. On a similar note, you might be required to apply for a federal business license if you sell products to a governmental division or one under the federal supervision.
Home Occupation Permit
If you’ve decided to operate your business from home, you’ll need a home occupation permit. It’s crucial to remember that not every residential locality allows you to conduct home-based business.
You’re more likely to get the permit if your operations have absolutely no impact on the lives of your neighbors.
While you set up your online business and look through the business licenses required, you’ll realize that every state has its own version of the laws and provisions. It’s crucial to go through your state’s websites and familiarize yourself with the specifications before applying for any license.