Depending on the kind of business you are in, your state may require you to be licensed based on your occupation or on the products that you provide or handle. There are also taxes that many states impose—most commonly sales tax, which you may be responsible for collecting, and a business income tax.
Licenses for Some Occupations
States typically require people in certain professions to be licensed. These include many of the health care careers—doctors, dentists, nurses, pharmacists and psychologists. Other professions that are typically licensed by a state include lawyers, accountants, architects and engineers.
There are more. If you are a barber, auto mechanic, private investigator, cosmetologist, real estate agent or tax preparer, you may need to obtain a license from your state.
Do I have to pass a test to get a license?
It is possible that you will need to take and pass a state-sponsored test for a license. For example, this is generally true if you want to be licensed as a real estate or insurance agent. You may also need to show that you have the appropriate education to be licensed.
Is the occupational license for myself as an individual or obtained through my company?
Again, this depends on the type of business. Some licenses are obtained through a partnership or corporation; others must be obtained by the individual.
Licensing for Certain Products
States require licenses for certain products. Cigarette manufacturing or distributing, motor fuel and liquor distribution, sale of firearms and gaming devices are some examples.
Sales Tax Licenses
If you are selling or reselling items, you will most likely need to become licensed at the state level. This might be called a sales tax license or a seller’s permit.
You will be collecting sales taxes on your products, which you then pay to the state. Even if your customers are nonprofits, and thus are exempt from paying a sales tax, you will still need to obtain the sales tax license.
Business Income Tax
Your state may impose a business income tax, and you will need to file a return. You may also need to file quarterly reports.
TIP: The best way to find out what licenses and taxes are involved at the state level:
- If you are in an occupation similar to those listed above, check with your state trade or professional association.
- A highly useful source is the Small Business Development Center (SBDC) near you. You can find the closest SBDC by going to http://www.sba.gov/sbdc.
- Check with the Department of Revenue or Secretary of State. Other department names that might be used in your state are Equalization Board, Sales Tax Commission, Franchise Tax Board or Department of Commerce.