Legal Basics: Permits, Licenses, and Taxes for Small Shops

Permits, Licenses, and Taxes: What Every New Consignment Shop Needs

Before you open your doors, you need to make your store legal. Every city and state sets rules for retail businesses, but most steps are similar. Missing a permit or misreporting taxes can lead to fines or even closure. That is why it pays to check these items off early.

Business Registration and Entity Structure

• Pick your legal structure: Will you run your shop as a sole proprietorship, partnership, LLC, or corporation? Many new shops begin as LLCs for liability protection and tax simplicity.
• Register your business name: File a “Doing Business As” (DBA) if using a name other than your own. Make sure your chosen name is not already taken locally or online.

Obtain Essential Permits and Licenses

• General business license: Required by almost every city or county for retail operations. Apply at your local clerk's office or small business website.
• Sales tax permit: Register with your state’s Department of Revenue. This allows you to legally charge, collect, and remit sales tax for each transaction.
• Resale certificate (if applicable): Allows you to buy inventory tax-free from wholesalers and sell it in your shop. Required in some states.
• Certificate of occupancy or zoning: Required for your physical location, confirming your shop meets fire code, health, and zoning requirements.
• Sign permits: Municipalities often require approval before putting up a sign outside or even on your windows.

Insurance

• General liability insurance: Protects your business in case a customer slips or gets hurt in your store.
• Property and loss insurance: Covers your building and its contents, including consigned inventory if you elect to include it.

Sales Tax Compliance

• Collect and remit: Nearly all states require sales tax to be collected on sales, even when items are sold on consignment. You will remit this tax to your state on a monthly or quarterly basis.
• Track transactions carefully: Use consignment shop software to record every sale, so you know how much tax is owed and can prove your compliance.
• Year-end reporting: Some consignors may need 1099-MISC forms if they earn over a set amount. Check with your accountant as rules can change.

Opening Checklist at a Glance

• Choose your business entity and register your name
• Apply for local and state business licenses
• Register for a sales tax permit and a federal EIN if needed
• Secure general liability and property insurance
• Obtain permits for your signage and confirm your shop’s zoning
• Set up a business bank account, bookkeeping, and receipt system

FAQ: Permits, Licenses, and Sales Tax for Consignment Stores

Next Steps and More Resources

• Contact your local small business development center for personalized advice
• Reach out to your city/county clerk or state Department of Revenue for forms
• Consult with a bookkeeper or tax professional for ongoing compliance