Do I need a business license to sell my products?

January 25th, 2019 by Arlette Mendenhall

Generally YES, in most cases you will need a business license.  Arizona imposes a “transaction privilege tax” or TPT on the privilege of doing business in the State of Arizona. If you sell tangible personal property of ANY kind, including crafts and foods, you MUST  be licensed and pay the TPT or sales tax on those sales.

But I just do it as a hobby.

If you make crafts, or  ANY KIND OF PRODUCT  and sell it to the public or another retailer, you are now a business and are required to have a business license.

What if I work for Scentsy, LuLaRoe, Avon or other companies?

If you are a direct sell distributor for a larger company, you may not need a business license, however, you will need to verify that with the company you work with.  Some companies may classify you as an  independent contractor.  Guess what! That means you own your own business, as you are merely a reseller for their products and services. And yes you would probably need a business license.

A good question to ask yourself is, (1) do I buy the product directly from the company and then resell it for a profit or (2) am I merely taking orders and submitting those to the company.  If you  answer yes to #1 then you need a business license. If you answer yes to #2, then chances are you do not need a license.

The best way to make sure you are operating legally and within the law is to contact the State Department of Revenue.  They will be able to help you determine if the business you are conducting requires a business license for the state you are operating in.  And yes this varies from state to state as well as business type.

What about a city business license?

Check with the city in which you reside also.  Again depending upon what you are doing you may also need a city business license. Sometimes this is included with the fee for your state license and sometimes each city handles their own licensing. Or they may not require one at all.

License MUST be displayed.

Be sure that if you are required to obtain any type of licensing that you bring a copy of the license with you to each and every event!  The reason for this is simple, we never know when a representative from the city or state may show up at the event and ASK TO SEE YOUR LICENSE.  If you do not have a license or do not have it with you, you could be fined and there goes the profits!  Most events now ask for your license number on their applications for this very reason.  It protects everyone from penalties. If you work for a company that covers you under their license, be sure to get a written confirmation from that company in the event of an inspection and be sure to provide a copy with your application to the event coordinator.

Reporting sales and paying your sales tax obligation.

Some licenses are a one time fee but will require you to submit tax reports on a monthly basis. In Arizona if you are an occasional seller, after the first year you may be placed on a quarterly or even yearly reporting basis depending upon your sales activity. The reason for these reports is that you as the business owner are responsible for  sales tax and paying that to the state.  This may be true also if you are required by the city to have a license .

Don’t risk getting shut down.

When in doubt – check it out.  Contact your city and state departments of revenue for further information and be advised changes do occur.  It’s best to check frequently for any changes that might effect your status. To learn more about what Cochise Crafters requires visit our Frequently Asked Questions page.

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