Having an Internet business can be a lucrative way to get customers, expand your market and increase sales. Typically, the licenses and permits that are required to start a business are the same as those required to start an Internet or E-Commerce business.
You will need a business license if you are starting or buying an E-commerce or Internet business just as you do with any other business. All businesses are required to obtain a business license. Even if you are operating your business out of your home, you will still need a business license.
Depending on your location, you may also need a city and county license. Such licenses are relatively easy to obtain and are not expensive. For local licensing requirements, contact your city or county government offices.
Requirements Vary by Type of Business and State
Not all businesses require the same licenses and requirements vary by state. The best thing to do is to check with your secretary of state. Different states may or may not require a license for a particular type of business.
While business licensing requirements vary from state to state, some of the more common types are:
- Business licenses—A state business license is the main document required for tax purposes and conducting other basic business functions
- Occupational and professional licenses—State licenses are frequently required for occupations as varied as building contractors, physicians, appraisers, accountants, barbers, real estate agents, auctioneers, private investigators, private security guards, funeral directors, bill collectors and cosmetologists
- Licenses based on products sold—Some state licensing requirements are based on the product sold such as liquor, lottery tickets, gasoline or firearms
Operating without a License
If you operate without the required license, you run the risk of discovery. Authorities may discover such unlicensed businesses by checking state tax law returns and resale licenses. If caught operating your business without the required permits and licenses, you run the risk of being fined or you may be ordered to cease the business.
Collecting Sales Tax over the Internet
Whether or not you will be required to collect sales taxes over the Internet may depend upon whether or not your business has a physical presence in a state, such as a store, office or warehouse. If you do not have a presence in a particular state, you are not required to collect sales taxes from customers in that state.
Not every state and locality has a sales tax. Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon do not have a sales tax. In addition, most states have tax exemptions on certain items, such as food or clothing.
If you need to charge sales tax then you must be familiar with the applicable rates. Many online retailers use online shopping cart services that are programmed to calculate sales tax rates for their sales transactions.