Do I need a license to provide services online?

Yes, you do need to obtain a business license to sell online. Keep in mind, the timing of when you need your license and the exact licenses you may need all depends on where you operate your business from and the type of online business you’re operating. 

Is a business license necessary to dropship?

Yes, if your business is a dropship-only model, you need to secure a business license. 

What if my online business distributes software?

If your business distributes software, then it’s possible it will need a business license. Some states consider software downloads as a taxable good, while other states do not address software at all. The best approach is to check your state’s specific laws and assume it is a taxable good.

Do I need a business license to sell on Amazon?

No, Amazon does not require you to have a business license to sell products through its site. However, your home state may require you to have one, so the best course of action is to check your local laws first.

Does my business structure affect what licenses I need?

There are some states where your business structure does impact the license you need, such as a sole proprietorship compared to a Limited Liability Corporation (LLC). Some states may limit the requirements if you’re only operating as a sole proprietorship, for example. When you’re researching the requirements for your local and state government, you’ll want to confirm the requirements for your type of business. 

Why do online sellers need to pay taxes in other states?

It is up to each state to decide whether or not to charge online sellers the sales tax for making sales within their state, even if the seller does not have a physical presence there. This is referred to as the nexus law. In 2018, the U.S. Supreme Court gave states the right to require tax collection for online retailers and sellers in the South Dakota vs. Wayfair, Inc. case, even if there is no physical presence in the state. 

About the Author

Sara Coleman

Sara Coleman

Freelance Financial Writer

Freelance writer with several years of experience covering personal finance topics such as insurance, loans, credit cards, budgeting and more.

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