Do You Need a Business License to Sell on Amazon?
A business license is given to a business to confirm that they are entitled to carry out specific activities.
When you sell on Amazon, in most cases, you are not required to have a business license. This is because you sell consumer goods not regulated by the federal government. However, the necessity of getting a license depends on your business type and scope, the category of goods you sell or produce, and your business location.
This post will give you an idea of when you may and may not need a license for your Amazon operations and how to get it. At the same time, we recommend consulting your legal advisor or accountant to determine if you need a license in your particular case.
Do You Need A Business License To Sell Online?
In most cases, e-commerce sales are not subject to licensing. On the other hand, that doesn’t mean your state or the local government will not require you to have the license. Your home state may have specific regulations as to sales activities, and you may be required to get a general or another type of business license.
According to the Internal Revenue Service (IRS), your sales activity may be subject to licensing depending on the state where your business operates and may differ by state, county, and municipality. You may also be required to pay state and local taxes.
To ensure you comply with all legal and tax requirements, it’s a good idea to consult a local IRS office or a legal counsel and check if you need to obtain a license.
Do You Need A Business License To Sell On Amazon FBA?
Generally, when you open a Seller Central account, Amazon doesn’t require you to have a business license.
You will likely not need a license if you are a private label, online arbitrage, or retail arbitrage seller. But if you sell wholesale and have significant sales volumes, you will probably need a business license and sales tax permit.
Do you need a business license to sell on Kindle Direct Publishing?
Kindle Direct Publishing (KDP) allows you to self-publish eBooks or other types of books for free. With this option, you can list on Amazon the books you’ve written yourself or those you own the rights for.
As a rule, you do not need a business license to sell Kindle books since you sell them on the Amazon marketplace. However, you may need it if you sell many books.
When Do You Need A Business License To Sell On Amazon FBA?
The necessity to get a license may depend on the type of your Amazon business, the products you sell, and your business location.
Business operations that require a license
If you are going to sell wholesale, you will probably need a business license and sales tax permit. As a wholesale seller, you buy bulk products to resell them for profit on Amazon. When you source your products, many brands and distributors will ask you for a license and sales tax permit before opening a wholesale account for you.
On the other hand, if you are a private label, online or retail arbitrage seller, or a dropshipper on Amazon, and your business is retail sales, you will not need a license.
Related: Amazon Seller Compliance Documents
Products that require a business license
Usually, consumer products sold on Amazon do not require licensing and federal approvals. Some specific industries and activities require you to obtain licenses on the federal or local levels. However, the products subject to federal licensing are not typical for Amazon sellers.
A federal business license is needed in the following industries:
- Alcoholic beverages;
- Firearms, ammunition, and explosives;
- Fish and wildlife;
- Commercial fisheries;
- Maritime transportation;
- Mining and drilling;
- Nuclear energy;
- Radio and television broadcasting;
- Transportation and logistics.
State, county, and city business licenses are needed in the following industries:
- Restaurants and bars;
- Food production.
Local regulations may require you to have a business license
Irrespective that your Amazon sales take place online, your business is governed by the laws of the state where it’s registered. That means you must or must not obtain a license depending on the regulations applied in the place of your business registration.
How To Register A Business License?
In some cases, Amazon may ask you to provide a business license. If that is the case, you’ll need to get it.
The process of getting a business license differs in various states. Usually, you can apply for a business license on the website of the Small Business Administration or another state's governing agency responsible for issuing licenses.
Obtaining a business license step by step
Step 1. Check with the state governing agency what type of business license you require.
Step 2. Submit your application, including any required information; pay a processing or filing fee if applicable.
Step 3. Wait until your application is approved; it may take some time.
Step 4. When (and if) your license expires, renew it.
When Do You Need A Sales Tax Permit?
A sales tax is a consumption tax imposed by the government. It is levied on retail sales of goods. If you sell retail products, typically, there is a sales tax on them. Usually, it is applied to final consumption.
To collect a sales tax, sellers may need a sales tax permit. However, if you sell products on e-commerce platforms, for instance, Amazon, eBay, or Etsy, the platform is responsible for collecting sales tax on merchants’ sales to customers in most US states.
In such a case, you will not need to collect sales tax, and a sales tax permit is not required.
If you sell with Online Arbitrage and buy products inside the U.S., you will be subject to sales tax when you purchase your products.
If you purchase goods from wholesalers inside the U.S. for resale purposes, you must provide a resale certificate to be exempt from the sales tax.
If you purchase your products outside the U.S. to resell them on Amazon — for instance, from China — you don’t need a sales tax permit because imported goods are not taxed with the sales tax. When you sell them on Amazon, the marketplace will take responsibility for collecting tax.
However, if you sell your products on Shopify or your own website, you may need to collect a sales tax and a sales tax permit.
Do You Need A Sales Tax Permit To Sell On Amazon?
The seller permit for Amazon FBA also called a sales tax permit, allows you to collect sales tax on taxable products. The collected tax should be sent to your state taxing authority. Seller permits apply in specific states.
As a rule, you don't need a seller permit to do business online unless you sell products in a regulated industry such as health care.
Amazon calculates, collects, and remits tax on merchants’ sales delivered to customers in states that have enacted Marketplace Facilitator, Marketplace Fairness, or similar laws. According to these laws, tax collection responsibility is shifted from the sellers to the Amazon marketplace. These are the majority of the US states.
However, Amazon sellers may have different sales tax collection obligations depending on their sales operations scope.
Do You Need An LLC To Sell On Amazon FBA?
LLC, or limited liability company, is a type of legal entity. Generally, it is not necessary to register a company to sell on Amazon.
If you haven’t registered a legal entity and started selling on Amazon, your business is considered a sole proprietorship. It's legal to sell online as a sole proprietorship once you’ve paid all applicable taxes.
In the U.S., in most cases, you don’t have to be a registered business to sell on Amazon. However, your state may require you to register an online business.
As a general rule, forming an LLC or getting a business license is not dependent on each other. You don't need a business license to start an LLC, and you don't need an LLC to get a business license.
At the same time, depending on your business location and business type, your city, county, or state authorities may want you to obtain a specific business license, with or without having an LLC.
As a rule, when you sell on Amazon, you are not required to have a business license or register a company. However, the necessity of getting a license depends on the type and scope of business you run, the category of goods you sell or produce, and your business location.
When selling on Amazon, you must comply with all laws. Therefore, it’s a good idea to check with your county and city clerk’s office to learn more about your local legal, license, and tax requirements.
For having a successful business on Amazon, it’s also vital to ensure that your product is profitable and all taxes are thoroughly calculated and accounted for.
There are seller tools that help you calculate all Amazon fees, including sales tax and VAT. You can do it with Seller Assistant App’s FBM&FBA calculator.
Seller Assistant Аpp is an all-in-one extension incorporating features vital for product research. Advanced IP Alerts can immediately tell you if a product has any sales restrictions or has led to problems with account health in the past. It combines an FBM&FBA profit calculator, Quick View, Stock Checker, and Restrictions Checker in one tool.