Do you have aspirations to join the roughly 2.1 million sellers on Etsy? Then you need to know whether you need a license to sell on Etsy.
The short answer is: no, Etsy doesn’t ask for any license or permits when you sign up as a seller. The long answer is more complicated.
The prospect of selling on Etsy is exciting but you do need to be sure what you require to succeed on the platform. In this article, you will learn what you have to do to start selling on Etsy.
Do You Need a License or Permit to Sell on Etsy?
Etsy doesn’t require any license or permit from sellers, nevertheless, local and federal authorities may have certain legal requirements you must comply with when you want to run an online business.
Etsy doesn’t have any legal requirements, but if you intend to run a business activity, you will be obliged to provide certain documents to authorities, not because you want to sell on Etsy, but because you want to make a profit on Etsy.
In other words, you do not need a license to sell on Etsy, but you need a license to run a business on Etsy.
Can You Sell on Etsy Without a Business License?
If you run your shop as a hobby, you don’t need a business license.
How do you know if your online venture will be regarded as a business or a hobby? Here are some criteria the IRS uses to determine whether Etsy merchants are business owners or just hobbyists.
The authorities will regard your online venture as a hobby if you
- occasionally sell one or two items
- don’t make a substantial profit from your venture
- don’t make a living from it
- don’t keep typical business records
- are not taking steps to grow your business
Keep in mind though, you are responsible for tax on anything you sell in your Etsy shop.
So, if selling your wares on Etsy is a hobby for you, you don’t need to apply for a business license, but you must pay tax on any income you make.
The authorities will regard your Etsy shop as a business if you
- engage in practices to grow your business
- employ people to help you
- keep books and records of your business operations
- spend most of your time making your Etsy store successful
- make a living from selling via your Etsy store
- are following business practices
- have a history of making a profit from selling
- have demonstrated a certain level of profitability in your store over some years
In short, your activity on Etsy is a business if you conduct it in a business manner, selling products to make a profit.
The definition of a business activity includes any activity a business engages in to make a profit.
Most Etsy store owners don’t think of their Etsy involvement as a hobby. According to StartupBonsai, 76% of them regard their online shop as a small business. In short, they sell on Etsy to make money.
What Do You Need to Sell On Etsy?
What License Do You Need?
Once you’ve determined that you want to open a store to run a business, you need to take the necessary steps to acquire the appropriate licenses and permits for your Etsy shop.
1. Apply for a Business License
A business license is a legal document that grants the applicant the right to operate a particular business in a particular city, county, state, or country. Remember, selling for a profit on Etsy without a business license is illegal.
Take the following steps to apply for a business license.
Choose and Register a Unique Business Name.
Don’t take this step lightly. Put some thought and effort into it. Your business name is the first thing customers see and shapes the impression they have of your brand.
It is a requirement that a new business name must be different from other existing business names. Ideally, your business name should convey what products you offer and the general purpose or uniqueness of your business.
Your company name should stand out, be memorable, and comply with Etsy’s store name guidelines.
Bear in mind that your business name is not necessarily the same as your store name. Your business name denotes your legal identity, it is the name that will appear on legal documents. Your store name on Etsy could be the same but it could also be different.
Verify Your Business Name
Once you’ve chosen a name, you need to consult various resources to confirm that the name hasn’t been registered already. To establish business name availability, consult the following resources:
- Do a general internet search, including social media platforms.
- Consult the online name-check tool maintained by the office of the Secretary of State.
- Consult your county clerk’s office for existing DBAs (Doing business as) businesses.
- Do a trademark search of the federal database of trademarks.
This is a tedious but vital step, that helps you avoid infringing on the intellectual property of someone else.
Register Your Business Name
Once you’ve settled on a unique name, register it with your local government or the Secretary of State.
You can do this in three ways:
- Form a business entity, such as a corporation or limited liability company (LLC).
- Register the business name as an assumed name or DBA (doing business as).
- Register the business name as a federal trademark.
Decide on a Business Structure For Your Etsy Store
The business structure you decide on will affect the registration of your business. The most common forms of business formed on Etsy are sole proprietorship, partnership, and Limited Liability Company (LLC).
Here follows a brief discussion of each to help you decide what business model would suit you best.
Sole Proprietorship
A sole proprietorship is the most commonplace choice for Etsy shop owners – 88% of Etsy sellers run their businesses on their own. This is the preferred business model for a small business because it’s the simplest.
While a sole proprietorship is easy to set up and you don’t need to pay corporate tax, you carry all legal and financial responsibilities.
In case of a legal dispute, your personal assets, income, and properties aren’t protected.
Limited Liability Company (LLC)
This business structure separates your personal assets from your business, which means your personal assets can’t be confiscated in case of a legal dispute.
Operating as an LLC means you can employ others in your business.
It costs more to register an LLC, but you still record your Etsy shop income and losses in your personal tax returns.
Partnership
In a partnership, you share the responsibilities with one or more individuals. This includes
decision-making, profits, and tax responsibilities.
In this arrangement, each partner is ‘jointly and severally liable for the partnership’s debts;
All partners assume personal liability for the business’s debt and legal obligations.
Running a partnership allows you to share the burden, it also can be a minefield of conflicts. And the more partners there are, the more conflict may arise.
Register Your Business.
Once you have a business name and have chosen a business structure, you should go ahead and register your Etsy shop as a legal entity. The particulars for this step will depend on the state where you conduct your business.
2. Apply for an Employer Identification Number (EIN)
Businesses need an EIN or Federal Tax Identification Number to file taxes with the IRS. It is like a social security number, only for businesses so they can pay employees and taxes.
If you are a sole proprietor, selling on Etsy you don’t need an EIN. You only need your social security number because you will use it to file your taxes. However, if you operate your Etsy shop as a partnership or LLC, you need an EIN. You will also need one if you plan to hire employees or have to collect or remit sales tax.
If you are in any doubt about needing an EIN or not, consult your local business authority.
3. Get a Home Occupation Permit For Your Etsy Store If Needed
Most likely you operate your Etsy shop from home. If that’s the case, the local authority probably has specific requirements that apply to home-based businesses in your area. Most cities allow home-based businesses, so it shouldn’t be a problem. Your best bet is to enquire from your local authority if you need a special permit or license to sell products from home.
4. Check If You Need a Seller License to Sell on Etsy
In addition to a business license, you may also need a seller’s license, which is a document that allows a company to sell goods and/or services and collect sales tax in a specific jurisdiction. The state where the business is located usually issues the seller permit.
You may need to inquire from your municipal, county, state, or federal agencies whether you need a seller’s license as well to sell on Etsy. You may have heard a seller’s license being referred to as a “sales and use” license or a “sales tax ID.”
5. Get HOA Approval If You Need it to Sell
If your neighborhood is managed by a Homeowners’ Association, you can’t ignore the fact. You will have to check with them if it’s okay for you to run your Etsy shop from home.
Many of these associations are not in favor of home-run businesses because of the impact they can have on the local environment and people living in the vicinity. The rules regarding running a business from home are usually stipulated in the association’s governing documents.
Keep in mind that even if local or municipal ordinances permit home-based businesses in the area, running your business from home may still not be possible if the governing documents don’t allow it.
Consult the governing documents to find out how the rules apply to your Etsy shop and also speak directly to your HOA to make sure what you need to do to get their approval.
6. Find Out If You Need a DBA License to sell on Etsy
If you are running your Etsy store as a sole proprietor, you may need a Doing Business As (DBA) license. The most common reason for a DBA is when a sole proprietor wants to run a business under a different name to protect their privacy or to have a better business name.
A DBA gives you a license to sell under a different name from the legal one you registered.
Some states or local governments require a DBA license if your Etsy shop name differs from your legal name. It is best to check with your local and state authorities on this so you can comply with the rules.
7. Do You Need a License If You Want to Sell Food?
If you want to sell food on Etsy, you must comply with laws and local regulations regarding food preparation, packaging, and selling. In addition for registering a food business, the FDA and local health departments may require you to at least
- Obtain a food handler’s license for each person making or packaging the food for sale
- Allow the local health department to inspect your home kitchen
- Take our insurance for basic liability protection
Other requirements may apply depending on the state you operate in. Some states will require you to have a specific permit, depending on what you’re selling.
It’s crucial that your entire process complies with safe food preparation guidelines.
Etsy requires store owners to comply with the Food, Drug, and Cosmetic Acts and the Fair Packaging and Labeling Act, which requires that all food labels display certain prescribed information like the ingredients, nutrition facts, and net weight, in addition to an indication of possible allergens or exposure to allergens.
Does Your Etsy Store Have to Collect and Remit Sales Tax?
As stated earlier, you must pay tax on everything you sell, but there is also the question of sales tax. Do sellers on Etsy need to collect and remit sales tax?
Specific state sales tax laws apply to marketplaces such as Etsy.
As a result of a United States Supreme Court’s ruling, states can require a seller to collect and remit sales tax on sales made into the state, if the seller reaches a certain revenue and, or transaction threshold in that state.
These rules, referred to as Internet sales tax laws, apply to anyone selling online, no matter what platform they’re using. This rule applies to all e-commerce platforms.
Etsy has decided to take on this, often confusing task.
The platform calculates, collects, and remits state taxes on all orders shipped to most states. You can confirm the exact list of states that Etsy handles tax for on the Etsy Seller Handbook.
But what happens if your customers are ordering from a state that doesn’t allow Etsy to handle sales tax? In this case, you are required to obtain a seller’s permit.
You need a seller’s permit but different states have different requirements. For instance, some states like Alaska have no laws in this regard.
Other states may only require a sales permit if you reach a certain sales threshold like a sales amount of ($100,000) or a certain number of sales transactions within a certain period.
In all these cases, it’s best to consult the authorities or legal professionals to make sure where you stand regarding taxes.
Start a Small Business to Sell on Etsy
You can have your own small business on Etsy by following these simple steps.
1.Create an Etsy account by visiting Etsy.com/Sell. Select “Get Started.” You can create an account with your email address or an existing Google, Facebook, or Apple account.
2. Set your shop preferences, including your default language, the country where you’re based, and note the currency your store will use in your Etsy Payments account.
3. Name your Etsy shop. According to Etsy’s guidelines, it must be four to 20 characters long, with no spaces or special characters.
You can’t choose a name that is already being used, it should contain no trademark infringements or foul language.
4. Start listing your products, which should be handmade products, vintage items, and craft supplies. Illustrate your products with high-quality photography and unique descriptions.
Note. Use tags cleverly to help customers find your products. Shoppers find products by searching for keywords in the search bar. The trick is for you to figure out what those keywords would be and to use them as tags.
5. Set up your payment and shipping options. You can choose from several payment options and Etsy allows you to set up shipping profiles according to products and destinations.
6. Once you’ve completed all these steps, you can launch your store and start selling on Etsy.
Tools to Help You Selling on Etsy
Etsy is the largest online marketplace for handmade, original, personalized, and vintage articles. There are no less than 43 different product categories that 5.90 million active sellers are selling on Etsy.
No matter how creative you are and how original your handmade products are, as a new Etsy shop owner, you and your creations will probably disappear in that crowd.
Unless you make a plan. Unless you leverage technology and let it work for you.
There are myriad management tools you can exploit to help you start selling and succeed as an Etsy seller.
Let’s look at some management software that will get you started on the right foot.
● Make It Easy for Customers to Find the Products in Your Shop
As you know from your own online shopping habits, shoppers rely on search results in search engines to find products they’re after. To find your Etsy products, potential buyers are also going to turn to Google or other search engines.
So what do you have to do? You need the right keywords to rank on Google. Marmalead can help you with that.
Marmalead is basically an SEO tool for Etsy that helps you with the keywords real shoppers use to find that special product on Etsy.
The tool tracks and analyzes search volume, engagement, and competition for long-tail keywords to help you sell on Etsy.
● Find The Most Iconical Vintage and Collectable Items for Your Etsy Store
If your store sells vintage and collectible items, finding them is a full-time job in itself. It is simply not possible to spend your time bargain-hunting at garage sales, auctions, and vintage clothes sales.
You do need help with this pivotal task and EstateSales.net is applying for that position.
The site lists upcoming estate liquidation sales and auctions in your city or town, and anywhere else you care to order from.
The site also introduces you to individuals and companies selling items they no longer need.
Yardsales.net is another resource you can consider for finding treasures that other people might consider trash.
The website will put you in touch with garage sales in multiple locations where you can find all sorts of treasures to sell on Etsy. A unique item you find in this way can become your best-selling product.
● Get a Handle on Your Total Etsy Seller Fees, Etsy Payments & Profit
Etsy fees can be confusing, which can make it challenging to price products correctly. If you are a creative who would rather focus on your art than be occupied with figures, Craftybase is for you.
Craftybase takes all factors into account when helping shop owners calculate Etsy fees, like Etsy seller location, buyer location, international sales price, shipping, and tax, as well as material and labor costs.
Everything you don’t want to be bothered with, done for you automatically.
● Manage Your Social Media Content with Flair
Everyone is on social media and that is where you’ll find your potential customers too. With the average person using seven social media channels, social media marketing remains the best way to reach them.
Outfy is a tool that helps Etsy merchants manage their social media channels and content with flair.
The app doesn’t only automate the creation and sharing of different types of content, it does so in an engaging manner using product photos, collages, GIFs, and videos. These shorts are stunning and delight Instagram, TikTok, Pinterest, and Twitter users.
Outfy lets you save time and get on with other duties by automating the publishing of posts.
● Use Your Etsy Store to Start a Dropshipping Business
Dropshipping is a very popular business model used by many Etsy sellers. This business model is so popular because things like manufacturing, packing, and shipping are handled by a third party, setting business owners free to concentrate on creating and selling.
As a creator of original designs, an Etsy store owner can run a successful store with the help of Printful. Printful is a print-on-demand and fulfillment company that prints your designs on a wide range of products, from t-shirts, and mugs to book covers and placemats, which you can then sell on Etsy.
All you have to do is connect your Etsy shop to the app and use its built-in Design Maker to create original designs that can be printed on various objects. It is the ideal opportunity to sell your original designs.
● Circumvent Etsy Restrictions And Start an Email Marketing Campaign
Email marketing remains one of the most effective marketing strategies but it’s not obvious how Etsy merchants can benefit from it.
One of the drawbacks of the Etsy platform is that you can’t collect the email addresses of your customers and visitors. If you have your own website, you could use that to capture your audience, but not all Etsy merchants have websites.
Fortunately, there is a solution. It’s called Handmade Newsletter.
You can sign up for a HandmadeNewsletter subscription page and direct your customers and visitors to it. From there you can use an email service like MailChimp to send newsletters to your subscribers and sell on Etsy.
Running email marketing campaigns is a proven marketing strategy, and this software enables you to do that.
Conclusion – What Do You Need to Sell on Etsy
If you want to sell on Etsy, the first question is do you need anything like a license or permit?
Is a license required to sell your vintage clothes and other unique items on Etsy? No, selling on Etsy doesn’t require a business license per se, but running a business on Etsy does.
Anyone can sign up as a seller and start selling on Etsy, but not all of them require a business license.
If you are a creator that makes unique products and you’re selling just some of them occasionally you do not need a business license to sell on Etsy.
Hopefully, after reading this article, you will know if you are going to need a license to sell your unique creations or unusual finds on Etsy. Good luck!
