One of the most common questions that entrepreneurs have when they are starting out on a new business venture is the following:
“Do I need a business license to sell on Amazon?”
Sifting through tax regulations is not most people’s idea of a good time, and the convoluted language that they are often laid out in can be difficult to decipher. In this post, we are going to help you by demystifying some of beliefs surrounding the requirements for sellers when it comes to making sales on Amazon. Read on for more information.
In answer to the question posed in the intro, the short answer is “no”. You do not need a business license to sell on Amazon or any of the other popular e-commerce market places.
You are free to sell almost all products on Amazon without a license or registering yourself as a limited company. This is because most products are consumer goods that are not subject to federal regulation. Not only does this apply to selling goods on Amazon, but the same rules apply for Facebook, eBay, Shopify, Etsy and Craigslist.
If you are a small-time seller who is looking to do nothing more than make some extra cash on the side, this will come as good news to you.
However, you should be aware that these licensing rules change somewhat if you are the owner of a profit-making business which uses Amazon as a medium for sales.
Selling as a Sole Proprietor or Business
Once you start turning a regular monthly profit, you will start to become of interest to the IRS. This is when you should consider opening an Amazon business account. To do this, Amazon will ask you to present the following information when you sign up:
- Your business name, address, and contact information
- An internationally-chargeable credit card with a valid billing address
- A phone number where you can be reached during this registration process
- Your tax identity information
If you have not already done it, you can register as a Limited Liability Corporation (LLC) for a small fee. You can then use your LLC to open an Amazon business account.
Having filed as an LLC, your next step is to secure a sales tax license from your local tax authority. Although Amazon and other online marketplaces will not often require you to possess a sales tax license to sell on their platforms, you must check tax obligations with an accountant to make sure that you do not land yourself in trouble with the taxman at the end of the tax year.
If you are selling on a small scale as an individual trader, you do not need to secure any kind of license in order to sell a small number of things on Amazon. If you start making a regular monthly income from your sales, you are obligated to register a business account with your LLC tax number and apply for a sales tax license.