Etsy collects and remits sales tax in most states. But your city doesn't know or care about that. Here's what you actually need as an Etsy seller.
This is the main thing most Etsy sellers miss. Your city or county requires a business license for anyone operating a business in their jurisdiction — including online sellers who never see customers in person.
The license typically costs $25–$100/year. You apply to your city or county finance or revenue office. Most allow online applications. The fact that you sell through Etsy doesn't exempt you.
If you make crafts, package goods, or run your Etsy business from your home, many cities require a home occupation permit. This is separate from the business license. It says your home address is approved for business activity.
Some cities automatically include this when you say you're home-based during the business license application. Others require a separate application to the zoning department.
A seller's permit authorizes you to collect sales tax on taxable sales. In most states, because Etsy is a marketplace facilitator, Etsy already collects and remits sales tax on your behalf for sales made through Etsy.
However: if you also sell at craft fairs, farmers markets, your own website, or anywhere outside Etsy, you need a seller's permit to collect sales tax on those sales. And some states still require a seller's permit even if Etsy handles the tax.
You don't need an EIN (Employer Identification Number) just to sell on Etsy. But many cities require it when you apply for a business license. Getting one is free at IRS.gov and takes 5 minutes.
No — an LLC is not required to sell on Etsy. You can operate as a sole proprietor. However, an LLC adds legal protection if a customer ever sues you over a product. This becomes more relevant as your shop grows.
⚠️ Heads up: This site explains business licensing in plain English. Not legal advice. Rules change. Always verify with your actual city or state office. Affiliate disclosure.