Yes — in almost every case, you need a business license to sell crafts from home, and usually more than one permit. At a minimum, expect to need a local business license or home occupation permit from your city or county, plus a state sales tax permit if you sell in one of the 45 states (or D.C.) that charge sales tax. On top of that, craft income is taxable, and once your net profit hits $400 in a year, federal self-employment tax kicks in. The exact stack depends on where you live, what you make, and how you sell it.
The Local Business License or Home Occupation Permit
Your city or county almost certainly requires some form of business license or home occupation permit before you start selling. These permits exist so home businesses don’t disrupt residential neighborhoods, and the application usually asks what you’re making, where you’ll store inventory, and whether customers will visit your home. Fees typically range from around $50 to a few hundred dollars.
Many localities issue a home occupation permit specifically, rather than a general business license. That permit often comes with conditions attached: limits on how much of your house you can use for the business (some jurisdictions cap it at 25 percent of floor area), restrictions on exterior signage, caps on daily customer visits, and rules on noise and traffic. If you sell exclusively online with no customer foot traffic, you may face fewer restrictions, but you still need the permit in most places.
The process itself is usually straightforward. You fill out a form at your local government office or online portal, pay the fee, and wait for approval. Some jurisdictions also require a separate zoning clearance confirming your lot is eligible for a home-based business. If your neighborhood has a homeowners association, check those covenants too. HOA rules can add restrictions the government permit won’t tell you about.
Zoning Rules You Have to Stay Inside
Zoning divides your community into residential, commercial, and industrial areas, and it limits what activity can happen in each. A craft business at home in a residential zone is typically allowed, but only within certain boundaries. The point of the rules is to keep your business invisible to neighbors, so they focus on outward impact rather than what you’re actually making.
Common restrictions include prohibiting exterior signs (or limiting them to a small nameplate), banning commercial equipment that creates noise or vibration detectable from outside, and limiting non-resident employees. Some areas restrict deliveries to normal postal and parcel carriers rather than commercial freight. Specifics vary widely, so a call to your local planning or zoning department before you start is worth ten minutes.
Violations get taken seriously. If a neighbor complains and the zoning department finds you’re operating outside your permit conditions, you can be ordered to stop. Repeated violations can lead to permit revocation and fines. The craft itself is legal; what triggers enforcement is the scale or visibility of the operation.
Do You Need to Register a Business Name?
If you sell under any name other than your full legal name, most states require you to file a “doing business as” (DBA) registration, sometimes called a fictitious name statement or assumed name certificate. Legal name Jane Smith selling as “Wildflower Pottery” needs to register the name. Filing fees generally run between $10 and $150 depending on state and county, and some states also require you to publish the name in a local newspaper, which adds roughly $50.
A DBA doesn’t create a separate legal entity or protect you from liability. It creates a public record connecting the business name to you, which you’ll need to open a business bank account and cash checks made out to that name. For actual liability protection, you’d need to form an LLC or corporation through your state’s secretary of state office, which involves higher fees and ongoing compliance requirements.
State Sales Tax Permit
If you sell a physical product in a state that charges sales tax, you almost certainly need a sales tax permit (also called a seller’s permit or resale certificate). Forty-five states plus the District of Columbia impose sales tax, and they expect you to collect the correct amount from buyers and send it in on a schedule they assign. Registration is usually free or carries a nominal fee, and most states let you register online through the department of revenue.
Once you’re registered, you’ll file sales tax returns monthly, quarterly, or annually depending on your sales volume. The return reports what you collected and remits the tax. Filing late, even by a day, can trigger penalties and interest. Small sellers sometimes get sloppy here when sales are low and the amounts feel trivial. The state doesn’t see it that way.
One useful side benefit: your sales tax permit lets you buy raw materials tax-free. When you purchase supplies that will become part of a finished product for resale, you present your permit number to the supplier and skip paying sales tax on that purchase. You’re not avoiding the tax; you’ll collect it later from the end buyer, which prevents the same materials from being taxed twice.
What Etsy, Amazon Handmade, and Other Marketplaces Handle
If you sell through a platform like Etsy, Amazon Handmade, or Shopify with integrated payment processing, marketplace facilitator laws in every state with a sales tax now require the platform itself to collect and remit sales tax on your behalf for orders shipped to those states. That handles the calculation and payment for marketplace transactions.
But these laws only cover sales made through the platform. If you also sell at craft fairs, through your own website, or directly to local buyers, you’re responsible for collecting and remitting sales tax on those transactions yourself. You still need the sales tax permit either way, because it’s the legal foundation for all of your taxable sales.
Federal Income Tax and Self-Employment Tax
Craft income is taxable income. Even if you don’t receive a 1099 form, you’re required to report what you earn. Home-based craft sellers file a Schedule C with their federal return, reporting total revenue and deducting business expenses to arrive at net profit. That profit gets added to your other income and taxed at your regular income tax rate.
On top of income tax, you owe self-employment tax on net earnings of $400 or more. That’s 15.3 percent of your net self-employment income, covering Social Security and Medicare.1IRS. 2026 Publication 15-A If you’re used to being a W-2 employee this stings, because your employer normally pays half; when you’re self-employed you pay both halves. You can deduct the employer-equivalent portion on your 1040, but you still feel the cash flow hit.
If you expect to owe $1,000 or more in combined income and self-employment tax for the year, the IRS expects you to make quarterly estimated tax payments rather than wait until April.2IRS. Estimated Taxes Missing them triggers an underpayment penalty. Payments are due in April, June, September, and January of the following year.
Deductions That Bring Your Taxable Profit Down
Your taxable profit is revenue minus legitimate business expenses, and craft businesses generate plenty of deductible costs. Materials, supplies, shipping, packaging, and tools all count. So do platform fees like Etsy listing and transaction fees, craft fair booth fees, and business insurance premiums.3IRS. 2025 Instructions for Schedule C (Form 1040)
If you use part of your home exclusively and regularly for the business, the home office deduction is available. The simplified method lets you deduct $5 per square foot of dedicated workspace, up to 300 square feet, for a maximum of $1,500.3IRS. 2025 Instructions for Schedule C (Form 1040) Driving to buy supplies or deliver products is deductible at the 2026 IRS rate of 72.5 cents per mile.4IRS. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile
One note on 1099-Ks: if you sell through a marketplace or take payments through a third-party processor, that platform may send you and the IRS a Form 1099-K. For 2026 the reporting threshold is $20,000 in gross payments and more than 200 transactions.5IRS. Treasury, IRS Issue Proposed Regulations Reflecting Changes From the One Big Beautiful Bill Even if you sell below that threshold and no 1099-K arrives, you’re still legally required to report all the income.
Extra Rules if You Make Children’s Products
If you make anything intended for children under 12, federal product safety law applies regardless of how small your operation is. The Consumer Product Safety Commission requires manufacturers of children’s products, including individual crafters, to test their products for compliance with safety standards and issue a Children’s Product Certificate for each product line.6Consumer Product Safety Commission. Testing and Certification Testing has to be done by a CPSC-accepted third-party laboratory and covers items like lead content, small parts hazards, and flammability.
Lab testing can run hundreds of dollars per product, which is heavy for small sellers. The CPSC offers relief through its Small Batch Manufacturer registry. If your total gross revenue from consumer products was $1,480,296 or less in the previous calendar year and you made no more than 7,500 units of a given product, you can register and qualify for an exemption from certain third-party testing requirements.7SaferProducts.gov. Small Batch Manufacturers Registration renews annually.
Even with the small batch exemption, every children’s product needs a permanent tracking label with the manufacturer’s name, the location and date of production, and a batch or run number or other identifying information.8Consumer Product Safety Commission. Tracking Label The label has to be legible and permanently attached to both the product and its packaging. If you make children’s clothing, toys, or accessories, build this into your production process from the start rather than retrofitting later.
Insurance Worth Considering
Standard homeowners policies typically cover only about $2,500 worth of business equipment. If your sewing machine, kiln, tools, and inventory are worth more, a claim for theft or fire will leave you short. Some insurers offer endorsements raising the limit to $5,000 or $10,000 for a small additional premium.
Product liability is the bigger concern. If something you sell injures a buyer or damages their property, you’re personally liable. General liability insurance with product liability coverage protects against claims for defects, inadequate warnings, and design flaws, and it covers legal defense costs even when the claim is groundless. Many craft fairs and wholesale buyers require proof of coverage before they’ll work with you. If you sell children’s products, this coverage moves from nice-to-have to essential.
A Starting Checklist
Individually, none of these requirements is complicated. They just stack up. A practical order to work through them:
- Register for a local business license or home occupation permit and confirm your zoning allows it.
- File a DBA if you’re selling under any name that isn’t your legal name.
- Get a sales tax permit from your state’s department of revenue.
- Open a separate bank account and start tracking income and expenses immediately.
- Plan for quarterly estimated federal tax payments if you expect to owe $1,000 or more.
- If you make children’s products, research CPSC testing, certification, and tracking label rules before listing anything for sale.
The cost of getting this right at the beginning is a fraction of what it costs to untangle penalties, back taxes, or a product liability claim later.