There is no legal policy stating that a business must have a license to sell anything on the Etsy platform. However, there are some binding obligations that require a seller of goods to obtain a permit from a municipal, county, state, or federal agency before selling anything on Etsy.
Let us first try to understand what Etsy is and then when a license is required.
What Is Etsy: An Overview Of The Platform
Etsy is a platform where sellers are encouraged to sell handmade items or some special items. This platform is primarily designed for users who are skilled at handcrafting or other specialties and want to sell their skills. This platform works as a bridge between sellers and customers that are looking for unique crafts, craft supplies, and products.
Is It Compulsory To Obtain A License To Sell On Etsy?
There are two controversies relating to this. The first one is yes, you can sell on Etsy without obtaining a license. The second is that you cannot sell on Etsy without obtaining a license. These two are contradictory statements in themselves. This is so because if you are selling some goods or products over this platform as a hobby, then you aren’t required to obtain a license.
On the other hand, if you are selling some goods or products on this platform as a business, then you are required to obtain a license. If you are engaged in a business, then it becomes necessary to obtain a license, and without a license, your goods will be treated as illegal.
For Good Business On Etsy
If you are selling anything on Etsy as a business, then you need to obtain a legal license first. The question now is how you will know if you are running a business or not. There is a criterion that the IRS has formed to know whether a person is engaged in a business or performing a hobby.
This criterion states that if you are spending more time and effort to sell your product and you are getting more and more profit out of that, then it will be considered a business. You must acquire a business license if it is regarded as a business. If you fail to do so, then you will be unable to sell your products on Etsy.
If You Have A Hobby That You Want To Outshine
If you are selling something on Etsy as a hobby, then you do not need to obtain any business license. This platform provides you with the option to write off your losses, such as if you spent $100 on making something but you sold it for $60, then you can easily write off the $40 as a loss.
However, if you generate any income using the platform, you have to pay taxes on it. No matter if you are earning income as a business or as a hobby, any incinerated from the platform is taxable.