When starting an eCommerce business, you have to factor in the costs of obtaining the necessary business permits or licenses. Good news is that you don’t need so many licenses to operate an online business compared to a physical one and most of the permits are relatively easy to obtain. You must stay compliant with your state’s tax laws failure to which you risk your business’s closure. Also, the permit requirements may vary from one state to another, so it is crucial to find out with your state’s licensing board to ensure you have all the necessary permits.
Business operation license
A business operation business allows you to operate or run a business in your city, state, or county. Regardless of the online business, you want to open, you need this permit to operate legally. However, the requirements to apply for a business operation license may vary from one state to another. You should also enquire if you need to renew the license after a specific period to avoid operating with an expired license.
Employer identification number
Also called EIN, it is a federal tax ID number that the IRS issues to identify your business as a distinct tax identity. Although it is not specifically a business license, it ensures that your business stays in compliance with payroll taxes to avoid tax-related issues in the long run. It comes in handy during other applications like opening a business bank account, applying for a seller’s permit, hiring employees, etc.
Seller’s permit
Only five states do not require a seller’s permit, including New Hampshire, Delaware, Alaska, Montana, and Oregon. You need a seller’s permit to sell taxable goods or services in all the other states, and it allows you to collect sales tax which you then remit to the state’s revenue department. The permit is state-specific; for instance, you need a San Antonio seller’s permit to sell taxable goods in San Antonio, so you should apply for it in your state.
Doing business as (DBA) license
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A DBA license allows you to run an online business under a business name other than your own. For instance, you may decide to call your shoe business ‘two in one shoe company’ other than ‘Francis junior.’ A DBA license may not be a must, but you need it to accomplish other business processes like enforcing any necessary contracts or opening a business bank account.
Sales tax license
Another license you need when opening an online business is the sales tax license because your business must pay sales tax on the taxable products and services sold. But keep in mind that sales tax license requirements differ from one state to another, so you should follow your state’s requirements. You should also find out of there are any other tax permits required by the states you intend to base your business. Also, avoid collecting sales taxes without a license as it could result in hefty fines.
conclusion
Complying with state tax laws is mandatory when starting an eCommerce business. Research extensively because obtaining these permits in different states may differ in terms of the requirements and fees.
