Required Licenses for a Craft Business

What are the required licenses for a craft business?

At some point, your sales have grown and you are starting to wonder if you should get a business license and open a business checking account  Legally, you need a business license from the beginning. But as you probably know, there are many folks selling products from their home who never bother to get a license.

Problems arise when you have income to your checking account and the IRS wants to know where it’s from. As a small business owner, you can legitimately have income and expenses from your business. As a hobbyist, you can’t deduct expenses from the money you make.

One of the primary ways to document that you are a business is by having a business license and a business checking account — most banks will require a copy of your business license before opening a business checking account.

Getting a business license is fairly easy. They are most often issued by your county. Find a link to your state’s business licensing info at:  https://www.sba.gov/content/what-state-licenses-and-permits-does-your-business-need

The other legal document you will need, especially if you sell at craft shows is a state sales tax permit. Typically, states require that you collect and pay them sales tax on any purchases made in your state, whether the sale is online or by mail or over the counter. To apply for a sales tax permit, search online for “(your state) sales tax permit application.”

If you travel out of state to do craft shows, you will need a sales tax permit for each state you sell in. For example, I do shows in Texas, New Mexico and Arizona and have permits for each state. And even if I have zero sales, I still have to file a report. But each state has its own filing requirements so don’t make the mistake of thinking reports are all due at the same time. I got fined $60 for being late with one state’s returns.

If you sell food products, there’s yet another set of food handling regulations to meet, but each state has it’s own procedures for licensing. If you are starting out in the handmade food products business, do a search for your city with the words “food product business incubator.” I found an agency that offered an already licensed kitchen with appropriate permits. They also provided counseling for getting started the right way in the food products business.

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