Do I Need a Business License to Sell Crafts?

The laws for selling handmade crafts are complicated, whether you’re selling online or in person. Running a small business is hard enough, let alone learning how to register your business, pay your taxes and avoid legal mistakes crafters are prone make.

Keep in mind, that the below information is not legal advice. It never hurts to consult with a tax professional before jumping into a new venture!

It’s important to understand the regulations that apply to your specific situation. What type of licensing you need is based on a variety of factors such as your location, your business structure, the types of products you sell, where you sell them, and how.

As an example, if you are selling at craft shows, flea markets, or similar in-person events, you most likely need to be collecting sales tax. Most states require sellers to register with the state they are selling in, to remit and collect sales tax for physical goods.

These rules also apply to out-of-state sellers selling within the state temporarily. Even some states that do not have a general sales tax, occasionally do have rules for out-of-state temporary vendors (For example, the state of Oregon does require out-of-state sellers to obtain a temporary business license certificate).

However, if you are selling your products online, like on My Community Made, you do not need to register to collect sales tax in your state, because online marketplaces fall under Marketplace Facilitator law. This means, that the platform is responsible for collecting and remitting sales tax on your behalf.

For those craft businesses that plan on selling at in-person events, this handy guide by Avalara can help you see whether your business is required to obtain a sales permit before your show. This general information is also useful for any show organizers looking to make sure their sellers are legally compliant as well.

If you do end up needing a vendor license in order to operate your business, you will also need to select a business entity. Most craft businesses operate as a sole proprietorship, but in some cases it makes sense for you to consider structuring your business as an LLC (Limited Liability Corporation) in order to protect your personal assets.

In order to register your business, you will need to Obtain an employer identification number (EIN) from the IRS. Your EIN is what you will use to report revenue and pay taxes to the IRS.

After obtaining an EIN you will need to check with your state’s website to register with your specific state. In some cases, you may need to register with your town or county as well, so be sure to check with your specific region’s laws prior to registering.