Yes, in almost every case, and selling only online changes far less than most new sellers assume. The confusion usually comes from picturing a business license as something tied to a storefront. Cities and states issue these licenses based on the fact that a business exists and operates within their jurisdiction, not on whether that business has a physical address customers can walk into. A handful of separate requirements tend to get bundled together in people’s minds as “the license,” when they are actually distinct filings with different rules.
The General Business License Applies Regardless of Where You Sell
Most cities and counties require anyone operating a business within their borders to hold a general business license or business tax certificate, and the requirement typically depends on the business activity and location rather than whether sales happen in person or through a screen. A seller running a clothing shop entirely from a laptop still operates a business physically located wherever that seller lives, which is usually enough to trigger the same local licensing requirement a brick and mortar shop would face.
The Sales Tax Permit Is a Separate Requirement, and Clothing Gets Complicated
A general business license and a sales tax permit solve two different problems, and a seller needs to check both separately. Clothing sales tax rules vary sharply by state. Minnesota, New Jersey, Pennsylvania and Vermont exempt most clothing from sales tax entirely, while New York exempts clothing priced under $110 per item, Massachusetts exempts under $175, and Rhode Island exempts under $250. Every other state with a general sales tax taxes clothing the same way it taxes any other retail good. The classification traps inside these exemptions catch real businesses, not just hobbyists. In January 2026, SKIMS paid $200,000 to settle with New Jersey over charging sales tax on swimwear that state law actually classified as exempt clothing rather than taxable athletic apparel, a distinction that cost a company with a full finance team real money.
Marketplace Facilitator Laws Changed Who Actually Collects
Selling through Etsy, eBay, or a similar platform shifts part of this burden automatically. Following the 2018 Supreme Court decision in South Dakota v. Wayfair, nearly every state with a sales tax passed a marketplace facilitator law requiring the platform itself, not the individual seller, to calculate, collect and remit sales tax once the platform’s total sales cross that state’s threshold. Etsy alone now handles this automatically in 45 states plus Washington DC and Puerto Rico. That does not eliminate a seller’s obligations entirely. Many states still require registering with the state tax authority and filing periodic returns, even ones showing zero tax due, and any sales made outside the marketplace, through a personal website, a craft fair, or a wholesale order, remain the seller’s own responsibility to tax correctly.
A DBA Registration If Trading Under a Different Name
A seller operating under any name other than their own legal name, a brand name instead of a personal name, typically needs to file a “doing business as” registration with the state or county. This step runs separately from both the business license and the sales tax permit, and skipping it can create problems opening a business bank account or signing a wholesale agreement under the brand name later, since banks and suppliers generally want to see the DBA on file before treating the brand name as a legitimate legal identity. Even a seller who only ever plans to trade on Etsy or Depop under a shop name rather than their own name usually needs this filing, since the marketplace itself never checks whether the name is properly registered anywhere.
What Actually Happens Without the Right Paperwork
Operating without a required license or permit rarely gets noticed immediately, which is exactly what makes it a common mistake among new sellers rather than a rare one. The consequences show up later: fines from the city or state once discovered, back taxes owed on past sales that should have been taxed and were not, and a business bank or wholesale account that a supplier or bank will not open without proof of proper registration. FLJ’s own coverage of fashion startup compliance makes the same point from the growth side: the paperwork gets significantly harder to untangle once a business has scaled past the point where a missing registration was a quick fix rather than a real liability.
Handle the Paperwork Before the First Sale, Not After
A clothing brand selling entirely online still counts as a business operating from wherever its owner lives, and every requirement that applies to a physical shop applies here too, just filed through different forms. Checking city, county and state requirements before the first sale costs an afternoon. Untangling unpaid back taxes and missing registrations after a brand has grown costs considerably more than that.
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