Starting a successful Etsy store takes more than making creative handmade items. Starting a new business requires completing several steps, and obtaining licensing is important as it may impact your ability to operate legally.

Here, we’ll explain the different types of permits and licenses you may need and share some resources to help you get started.

Related: Guide to Starting an Etsy Store

What Licenses Do You Need to Start an Etsy Shop?

There are several licensing requirements for starting an Etsy store at the federal, state, and local levels. While licensing requirements vary by location, here are a few common business licenses and permits all businesses may need:

Legal Structure

One of the first registrations needed when starting an Etsy store is selecting a legal structure. A legal structure refers to how a business is organized to operate. The four main types include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).

Related: What is the difference between a sole proprietorship, partnership, corporation, or LLC?

Business Name Registration

While not necessarily a business license, it’s worth noting that to use a name for a business, many states require the registration of that name. Making matters more complicated, the process of name registration is different by state and the type of business entity.

For instance, sole proprietorships and partnerships generally need to register a business name (also referred to as a Doing Business As, DBA, fictitious business name, or assumed name).

Learn: How to register a DBA

Corporations and LLCs register the business name when the entity is formed with the state.

General Business License or Permit

Local regulations vary, but in some cities, a general business license or permit will be required. A few states require a business license; however, they are more commonly found at the city level.

Learn more: Business license requirements by state

Federal Employer Identification Number

The Federal Employer Identification Number (also referred to as a FEIN, Employer Identification Number, EIN, or Federal Tax ID Number) is a unique nine-digit number that identifies a business with the Internal Revenue Service (IRS).

Any business with employees or those that form as a partnership, Corporation, and in many cases an LLC, the business will need to get an EIN.

Sole proprietors and single-owner LLCs without employees can instead use the owner’s social security number.

The FEIN or owner’s social security number is used to open a business bank account, apply for a business credit card, or hire employees.

Learn: How to get an EIN

Sales Tax Permit or Business Number

In order to sell products and/or offer certain services, a state sales tax permit (also referred to as a business tax number or tax ID number) may be needed.  This permit creates an account number with the state’s Department of Revenue (or similarly named state taxing agency) to collect and remit sales tax.

The requirement for sellers to collect sales tax on Etsy is constantly changing due to the “marketplace facilitator” laws that several states have adopted. There was legislation in 2018 that requires online sellers, even those without a physical presence in the state, must submit sales tax in those states that require it. Etsy collects and remits sales taxes in most states instead of the seller. States where Etsy doesn’t submit sales tax, the seller will need to make their own arrangements.

Related: Sales tax information for Etsy sellers

Learn: How to get a sales tax permit in each state

Resale Certificate

When buying inventory that is being resold to customers, the business can purchase these items tax-free. A resale certificate (sometimes referred to as a seller’s permit) allows a business to purchase inventory and craft supplies, and instead of paying the sales tax to their vendor, they charge the sales tax to the end-user of the product.

A resale certificate only allows a business to not pay sales tax for items being resold, and sales tax will still need to be paid for supplies or equipment.

Learn: How to get a resale certificate

Certificate of Occupancy

In some communities, an Etsy store operating as a home-based business will need to get a home occupation permit to legally operate out of their home. Home-based businesses storing inventory in the home will also want to double-check their insurance policy, as business inventory may not be covered in the event of a loss.

While researching licenses and permits isn’t the most exciting thing when starting an Etsy shop, spending the time upfront to get it right the first time is with the investment. Not getting the proper licensing can result in fines and even temporarily closing the business, so be sure to talk with city officials to ensure the correct licenses have been obtained.