Do You Need a Seller’s Permit to Sell on Amazon?
Maybe you’ve wanted to go into e-commerce trading for a while now. But you are still not clear about what it entails.
You’re not alone, then. Many traders and part-time sellers don’t have it well spelled out. So you’re here on this page.
Selling on Amazon has become a lucrative aspect of e-commerce that many want to tap into. The market is now global more than ever. And to reach out to more potential customers and even business partners, your business needs products sold online too.
However, sometimes the bottleneck processes involved in setting up an e-commerce business are not encouraging at all, are they?
You may have wanted to set up a seller’s account with Amazon seller central, but you don’t even know if you have the necessary legal document or if they collect sales tax ID.
Let’s guide you through the paperwork process for which you seek advice. In this piece, we’d discuss if you need a business license to sell online. Do you need local business licenses to start selling on Amazon?
Do I Need a Business License to Sell on Amazon?
Selling on Amazon typically requires you to comply with various legal and regulatory requirements, which may include obtaining a business license. However, the necessity of a business license can depend on several factors, including the local laws where you operate, the type of products you are selling, and the structure of your business.
Here are ten general steps to help you determine whether you need a business license to sell on Amazon:
1. Determine Your Business Structure:
If you are operating as a sole proprietor, partnership, LLC, or corporation, you may need different licenses or permits.
2. Check Local Regulations:
Consult your local city or county government’s business office or website to determine the local requirements for operating a business. Some cities or counties may require a business license for any business operating within their jurisdiction, even online businesses.
3. Understand Amazon’s Requirements:
Amazon has its own set of requirements for sellers, including compliance with applicable laws and regulations. Review Amazon’s seller policies to ensure you meet their criteria.
4. Consult a Professional:
Consider consulting with a business advisor, attorney, or accountant who can provide you with advice based on your specific situation and help you understand the legal requirements applicable to your business.
5. State Regulations:
Some states may require a sales tax permit or other state-level licenses, especially if you are selling products that are regulated at the state level.
6. Federal Requirements:
If you are selling products that are regulated by federal agencies (e.g., food, drugs, firearms), you may need to comply with federal licensing or permitting requirements.
7. Tax Registration:
Regardless of whether you need a business license, you will likely need to register for tax purposes, such as obtaining an EIN (Employer Identification Number) from the IRS if you are in the United States.
8. International Sellers:
If you are selling on Amazon from outside the United States, you may have additional requirements to meet, including compliance with U.S. laws and Amazon’s international seller policies.
Depending on what you are selling and where, you might also need to consider obtaining liability insurance to protect your business.
10. Product Compliance:
Ensure that the products you are selling meet the compliance standards and regulations of the countries you are selling in.
While not every seller on Amazon may need a business license, it is crucial to research and ensure that you are meeting all legal and regulatory requirements to avoid any potential issues with your selling account or legal repercussions. Keep in mind that the information provided here is not exhaustive, and the requirements may vary based on your specific circumstances.
What Is A Seller's Permit ?
You know you’d need a driver’s license to legally be allowed to use your vehicle. So also, you may need sales tax or a business license to make sales for some e-commerce platforms. Online sellers would also require a taxpayer identification number or employer identification number. Your seller permit will approve the transactions and sales you make as a seller on the platform or website. That is if a business license is required of you in the first place.
Selling on Amazon
Now, about business activities on Amazon, especially Amazon FBA business, you generally don’t need a business license or a seller’s permit.
Amazon makes it easy for many sellers – you can sign up and create an account without having to procure a seller’s permit or federal license.
Why is this?
One of the reasons you normally don’t need a business license to sell on Amazon as a retail arbitrage seller is that the products sold on Amazon are mostly low-risk.
Why is no seller’s permit required to sell on Amazon?
You can mostly sell or look up products like a t-shirt, kitchenware, or others on Amazon. These items and more like them don’t have many health risks involved.
But if, for example, you were to sell restricted things like alcoholic beverages, cosmetics, and drugs, you would need a seller’s permit or business license to remit sales tax for that online business structure.
That’s because you’d be held more accountable for any health risks associated with your product.
Exceptions To Rules About Seller’s Permit
The general answer to the question, “Do I need a seller’s permit to start selling on Amazon?” is NO.
As we’ve already mentioned and explained, you don’t need a business license, whether it’s an individual sole proprietor business you want to run or a limited liability company on Amazon.
1. Exception – Your Goods Fall Under Federal Regulations
One exception we’ve also mentioned is that it may depend on what you sell.
Your business structure determines if you need a business license to sell.
In most cases, the items you can sell on Amazon don’t require business licenses from Amazon sellers.
You are expected to get the required permit for other items that may be classified as needing Federal Regulations.
Some items that need federal regulations include firearms and ammunition, agricultural alcoholic beverages, etc.
2. Exception – Municipal Laws and State Laws Require a License
One exception we’ve also mentioned is that it may depend on what you sell.
Another exception is the region from which you are selling on Amazon.
That is to say, the rules guiding where you stay matter for business licenses.
We didn’t generalize the answer for every LLC or business license case, and that’s for this reason.
The regulations concerning selling on Amazon or its federal tax may differ slightly for the federal government or even the local government of some specific regions or countries.
So, if, for example, you reside in the UK and a seller’s permit or sales tax permit is required there to sell, you must provide a permit from the Federal Aviation Administration Firearms and pay sales tax.
In these cases, the better question would be to ask, “Is a seller’s permit required of me to sell online on Amazon in [put in your region]?” so you can get legal or tax advice about the federal tax ID.
Top 3 Frequently Asked Questions
Must I have a registered business to sell on Amazon?
No. To sell your business entity on Amazon, not much is needed. You can create an Amazon seller account and start selling immediately after uploading your items and getting a few orders on your online business.
Can I sell on Amazon as a sole proprietor or individual?
Yes, you can sell on Amazon whether you register your Amazon business as a sole proprietor or a limited liability company.To sell on Amazon as a sole proprietor, you should know which type of Amazon seller account to build on. You can either register an individual account or a professional seller account. For startups, starting with an individual sole proprietor account is more advisable. It’s less expensive and accommodates a lower selling rate of online sales – about less than 40 units a month for online businesses. You can set up a professional account if you want to expand the borders of your business and sell more than 40 units a month. This type of account comes with the features you’d like, like advanced selling, adverts, and a broader range.
Do I need to be a limited liability company to sell on Amazon?
The answer here is no. You can register as a sole proprietor or a limited liability company to sell on Amazon. It depends on the scope of your business and the legal entity. A limited liability company will differentiate personal assets from your business assets. It will also grant you security from scammers and threatened customers who may want to bring up charges against you unjustifiably. However, it’s only wise to register as a limited liability company if you want to conduct business on Amazon full-time. You should stick to a sole proprietorship if it’s just a side hustle. It’s easier to manage, among many other reasons.
Concluding Discussion on Do I Need A Seller’s Permit To Sell On Amazon?
I think by now, you get the hang of it all.
It’s surely a financially wise strategy to decide to go digital and sell your products online on Amazon’s retail store.
And you generally shouldn’t need a business license or federal license to sell your business wares on Amazon.
But as explained, that’s if your state or local government agency says so.
For the minority that resides in regions where you have to get a seller’s permit, the process isn’t all that burdensome.
You can look up how to get a permit, and you’d be fine.