Once you get the hang of Etsy, it seems like a lucrative option to invest your time. However, the pertinent question that arises out of making any kind of sales is—do you need official documentation to conduct transactions? Do you need a business license to sell on Etsy? Here is all you need to know.
Does Selling on Etsy Count as Business?
The short answer—is no. Etsy does not require you to possess a business license. However, there’s a catch here.
In order to understand whether selling items on Etsy counts as business, your preliminary motive is important. There are only two possibilities if you are selling on Etsy—business or hobby. If it is the latter, you don’t need a business license. But if it is the former—the IRS might scrutinize it.
The IRS follows a set guideline in order to gauge whether you are a business. For instance, whether you manage books regarding your business, whether you have any ulterior motives to continue the business, the time you put behind the business, whether it is a source of livelihood, how much profit you’re making, and so on.
Now, here is the tricky bit. Showing yourself to be a hobby is a lot more complex than showing yourself to be a business. The IRS would be okay if you are running it as a hobby, but once you enter the profit zone, can you call it a hobby any longer?
Do I Need Any Other Permits?
It, therefore, becomes easier to classify yourself as a business. But for that, you’d need a few other pieces of documentation.
Firstly, you’ll need company credentials. Business name, trademark, structure and so forth. You will also need your Etsy income on your personal tax return. Along with this, you will need a Business Operation License. If you’re sharing a business or if you have people working under you, you will need an Employer Identification Number as well.
In addition to this, you will need a Seller’s License or a ‘Sales Tax ID’. This would allow you to sell items to folks in the state itself. This is rather subject to the state, so it is wiser for you to check for specifics on the IRS website. Finally, you will need Home Occupancy Permits in order to make it viable for you to sell items from home.
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