Business Licenses for Inventors

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Depending on the type of inventing you do and where you do it, the federal state or local government (or all three) may require you to have a license or permit or both. It’s wise to comply with all applicable licensing requirements -- you can incur fines if you don’t. Moreover, having such licenses and permits demonstrates you’re running a real business, not engaged in inventing as a hobby, something that is important when tax time comes.

The federal government doesn’t require licenses or permits for most small businesses. One important exception, however, is if your inventing activities produce environmental pollution, hazardous materials or waste or toxic chemicals, or if you need to store toxic materials or waste. In this event, you’ll likely need a permit from the federal Environmental Protection Agency (EPA). Penalties for failure to comply with these requirements are severe, so make sure you get a permit if you need one. To find out more about the EPA permitting process, visit the agency’s website at

State Requirements

Each of the 50 states (and the District of Columbia) has its own licensing requirements. These can differ greatly from state to state. Generally speaking, there are four possible types of licenses that you may need before you start your inventing business:

  • general business license 
  • occupational license
  • environmental permit 
  • sales tax permit 

General business licenses

A few states, for example, Alaska and Washington, require all businesses to obtain general business licenses. Other states require certain types of business to obtain general business licenses. Every state explains its licensing requirements on a state website. You can find links to most of these state websites at the SBA’s site (

Environmental permits

As with the federal government, you may need to get a state permit if your activities involve environmental pollution, hazardous materials or waste. If you fail to get an environmental permit you may be fined, ordered to stop doing business or criminally prosecuted. A great place to find information on these state requirements is the Small Business Environmental Home Page at There, you can find links to state government websites organized by category.

Sales tax permits

All states -- except Alaska, Delaware, Montana, New Hampshire and Oregon -- have sales taxes. If you sell your invention to the public and your state has sales taxes, you’ll need to obtain a state sales tax permit. You must complete and file the application before you make your first taxable sale. Many states impose penalties if you make a sale before you obtain a sales tax permit. Generally, you pay sales taxes four times a year. Be sure to collect the taxes due. If you fail to do so, you can be held personally liable for the full amount of uncollected tax. (By the way, you’ll be personally liable even if you’ve formed a corporation or limited liability company.)

Each state’s sales tax requirements are unique. A product taxable in one state may be tax free in another. The only way to find out if your invention is subject to sales tax is to contact your state sales tax department.You can find links to every state’s sales tax department at

Local Requirements

At the local level, you need to investigate whether your inventing activities require you to get one or both of the following:

  • hazardous waste permit, or
  • general business license.

Hazardous waste permit

In addition to federal and state hazardous waste permits, you may need a permit from your city or county government if your activities involve hazardous waste or materials or create environmental pollution.

General business licenses

Many cities, counties and municipalities require business licenses or permits for all businesses -- even one-person home-based operations. If you’re doing business within city limits, contact your city government to find out if you need a local license. If you’re in an unincorporated area, contact your county government. If you’re doing business in more than one city or county, you may have to get a license in each city or county in which you do business.

To find out what to do, call the appropriate local official in charge of business licensing.

This is often the city or county clerk, planning or zoning department, city tax office, building and safety department or public works department. Your local chamber of commerce may be able to direct you to the agency or person to contact.

To obtain a business license, you’ll be required to fill out an application and pay a fee. Fees vary from locality to locality -- from as little as $15 to several hundred dollars. Fees are often based on your projected gross revenues -- for example, 10 cents per $1,000 of revenue. Periodically, you’ll have to renew your license and pay a new fee, usually every year. It’s also likely that your locality will require you to post your license at your place of business.

Many self-employed people, particularly those who work at home, never bother to get a local business license. If your local government discovers you’re running an unlicensed business, it may fine you and bar you from doing business until you obtain a license.