How to Start an Online Store in 2026 (Costs + Steps)
How to start an online store in 2026: choose a platform, compare Shopify and Etsy fees, handle sales tax and shipping, price products and invoice B2B orders.
Quick answer: To start an online store, pick a product and test demand, choose a selling platform (your own store on Shopify, WooCommerce or Squarespace, or a marketplace like Etsy or Amazon), register your business and a sales tax permit, set up payments and shipping, price products to cover all fees, then launch with focused marketing.
Starting an online store is one of the lowest-cost ways to start a product business, but fees, shipping and sales tax quietly eat margins if you do not plan for them. This guide covers platform choices and costs, the legal and tax setup, a profit-per-order example and when you need invoices as well as order receipts. For general setup steps that apply to any business, see our pillar guide on how to start a small business.
What is an online store?
An online store (or e-commerce store) is a business that sells products to customers through a website or online marketplace, takes payment online and ships or delivers the goods. It can sell physical products, digital downloads or both. Models include holding your own inventory, print on demand, dropshipping and selling handmade goods you produce yourself.
Step 1: Choose products and validate demand
- Pick a niche. A specific customer (for example, home baristas or rock climbers) is easier to reach than "everyone."
- Check the margin. After product cost, platform fees, payment fees, packaging and shipping, you want a healthy gross margin; many sellers aim for at least 40% to 50% on low-priced goods so ads remain affordable.
- Check shipping. Light, small, unbreakable items are cheaper and easier to send.
- Test small. Order a small batch or sell on a marketplace first.
Our guide to how to price a product shows how to build a price from full cost, and markup vs margin prevents a common pricing error.
Step 2: Choose an e-commerce platform
| Platform | Cost model (check current pricing) | Best for |
|---|---|---|
| Shopify | Monthly plan; Basic is widely reported at about $39 a month billed monthly or $29 billed annually as of October 2026, plus payment processing | Your own branded store with many apps |
| WooCommerce | Free plugin; you pay for WordPress hosting, themes and extensions | Sellers who want control and already use WordPress |
| Squarespace / Wix | Monthly website plans with commerce features | Small catalogs and service-plus-product businesses |
| Etsy | $0.20 per listing, 6.5% transaction fee and payment processing (3% + $0.25 in the US), per Etsy's published fees | Handmade, vintage, craft supplies |
| Amazon | Monthly or per-item seller plan plus referral fees by category; optional FBA fulfillment fees | High-volume products with search demand |
Fees change regularly, so confirm on Shopify's pricing page and Etsy's fees and payments policy before you budget. If you sell on Etsy, our Etsy invoice guide explains how to give buyers a proper invoice.
Step 3: Register your business
- Choose a structure. Many sellers start as sole proprietors; an LLC adds liability protection, which matters more if you sell products that could cause injury. See LLC vs sole proprietorship.
- Register a name or DBA. Your store name usually differs from your legal name.
- Get an EIN. Free from the IRS; useful for banking and suppliers. See how to get an EIN.
- Get a business license. Check city and county rules, including home occupation permits.
- Open a business bank account and connect it to your platform payouts.
Step 4: How does sales tax work for online stores?
Sales tax is the most confusing part of selling online in the US. The key ideas:
- Home state: if you sell taxable goods, register for a seller's permit in your home state and collect tax on sales shipped to customers there.
- Economic nexus: since the 2018 South Dakota v. Wayfair Supreme Court decision, states can require out-of-state sellers to collect tax once their sales into the state pass a threshold, commonly $100,000 a year. See sales tax nexus.
- Marketplace facilitators: Etsy, Amazon, eBay and similar marketplaces generally collect and remit sales tax for sales made through them in states with marketplace facilitator laws.
- Shipping: some states tax shipping charges and some do not. See sales tax on shipping.
- Wholesale buying: use a resale certificate so you do not pay sales tax on inventory you will resell.
Platforms like Shopify can calculate tax at checkout, but you are still responsible for registering, filing and paying. Check rates in our sales tax by state guide. This is general information, not tax advice.
Step 5: Set up payments and shipping
- Payments: use the platform's built-in processor or a gateway such as Stripe or PayPal. Typical card processing for online payments is around 2.9% plus a fixed per-transaction fee; check your provider. See credit card processing fees.
- Shipping rates: decide between free shipping (built into price), flat rate or calculated rates.
- Carriers: compare USPS, UPS and FedEx through your platform's discounted labels.
- Packaging: weigh and measure packed products before setting rates; dimensional weight pricing can surprise new sellers.
Worked example: profit on one order
Riley sells handmade ceramic mugs on her own Shopify store. Illustrative figures for one $38 mug with $6.95 shipping charged:
| Line | Amount |
|---|---|
| Product price | $38.00 |
| Shipping charged | $6.95 |
| Customer pays (before tax) | $44.95 |
| Clay, glaze, kiln energy | -$7.50 |
| Box and padding | -$1.80 |
| Shipping label | -$9.10 |
| Payment processing (about 2.9% + $0.30) | -$1.60 |
| Ad cost per order (average) | -$6.00 |
| Contribution per order | $18.95 |
The contribution of $18.95 must cover the monthly platform plan, apps, photography and Riley's time. At 120 orders a month that is about $2,274 before fixed costs. If she gave free shipping without raising the price, contribution would fall to $12.00. Running numbers like this for every product is the single most useful habit for a new store owner.
Step 6: Build and launch the store
- Buy a domain and connect it to your platform.
- Take clear product photos and write descriptions that answer buyer questions (size, material, care, delivery time).
- Publish shipping, returns, privacy and terms pages.
- Set up tax collection for states where you are registered.
- Place test orders, including a refund, before launch.
- Launch to your existing network, then add one paid channel and email marketing.
When does an online store need invoices?
Retail checkout produces an order confirmation and receipt automatically. You need a proper invoice when:
- A business buyer orders wholesale and pays by bank transfer on net 30 terms.
- A customer places a custom order paid partly upfront (send a deposit invoice, then a final invoice).
- A buyer requests a VAT or tax invoice for their records.
- You sell at a market or pop-up and the buyer pays later.
Here is an example wholesale invoice for Riley's mugs:
| Description | Qty | Unit price | Amount |
|---|---|---|---|
| Ceramic mug, speckled white, 12 oz (wholesale) | 48 | $19.00 | $912.00 |
| Ceramic mug, sage glaze, 12 oz (wholesale) | 24 | $19.00 | $456.00 |
| Freight and packing | 1 | $64.00 | $64.00 |
| Subtotal | $1,432.00 | ||
| Sales tax (resale certificate on file: exempt) | $0.00 | ||
| Total due (net 30) | $1,432.00 | ||
You can build this in our free invoice generator. For platform-specific options, see our guide to e-commerce invoices for Shopify and WooCommerce, and use a packing list template for larger shipments.
How to market a new online store
A new store gets almost no traffic on its own. Pick one or two channels that match where your customers already spend time, and measure the cost of each order they bring in.
| Channel | Cost | Good for |
|---|---|---|
| Marketplace listings (Etsy, Amazon) | Fees per sale and optional ads | First sales and validating products |
| Search engine optimization | Time | Long-term traffic for products people search for |
| Social media content | Time | Visual products, building a following |
| Paid social and search ads | Per click or per impression | Fast testing once margins are known |
| Email list | Low monthly software cost | Repeat purchases, launches, promotions |
| Wholesale to local shops | Samples and time | Steady volume, brand exposure |
Track customer acquisition cost against the contribution per order from the worked example above. If an ad campaign costs $25 per order and each order contributes $18.95 before ads, it only works if customers come back. Our guide to customer lifetime value shows how to account for repeat buyers.
Bookkeeping and income tax for online sellers
Set up bookkeeping before your first sale. Record each payout from your platform as gross sales minus fees, not just the net deposit, so your income and expenses are both complete. Key points:
- Income tax: profit is taxed as business income; sole proprietors and single-member LLCs use Schedule C and pay self-employment tax.
- Form 1099-K: payment platforms and marketplaces report payments to the IRS once you pass the federal reporting threshold. Report all business income whether or not you receive a form. See our 1099-K threshold guide.
- Inventory and COGS: product costs are deducted as cost of goods sold when items sell, not when you buy them.
- Estimated taxes: set aside a share of profit and pay quarterly.
- Deductible expenses: platform fees, payment fees, shipping, packaging, apps, photography equipment and a home office if you qualify.
Keep your platform reports, supplier invoices and shipping receipts organized by month. They are the records you need if you ever reconcile sales tax or answer an IRS question.
One last setup tip: decide early how you will number wholesale and custom-order invoices so they do not collide with platform order numbers. A prefix such as WS-2026-001 keeps them distinct, and our invoice number generator can create a consistent sequence.
Common mistakes when starting an online store
- Pricing before counting fees. Platform, payment, shipping and ad costs can take a third or more of the price.
- Ignoring sales tax registration. Collecting tax without a permit, or not collecting when required, both cause problems.
- Too many products at launch. Start with a focused range you can photograph and stock well.
- Relying on one marketplace. Policy or fee changes can hit overnight; build an email list.
- Buying too much inventory. Cash tied up in slow stock is the most common online store cash problem. Track it with an inventory spreadsheet.
- Not tracking cost of goods sold. You need it for taxes and for knowing real profit.
Starting an online store works best when you validate products, choose a platform that fits your products, register for sales tax and know your profit per order before you spend on ads. For wholesale and custom orders, our invoice generator is free, needs no sign-up and downloads a PDF invoice created in your browser.
Frequently asked questions
How much does it cost to start an online store?
A small online store can launch for a few hundred dollars if you sell on a marketplace or a basic hosted plan and start with limited stock or print on demand. Budgets of $1,000 to $10,000 are common once you add inventory, product photography, a domain, apps and launch advertising. The ongoing costs are platform subscriptions, payment processing fees, shipping supplies and marketing.
Do I need a business license to sell online?
Usually yes. Most cities and counties require a general business license even for home-based online businesses, and if you sell taxable products you will need a sales tax permit in your home state. Some products, such as food, cosmetics, supplements and children's items, have extra federal or state rules. Check your city, county and state websites before your first sale.
Do I have to collect sales tax on online sales?
In your home state, generally yes for taxable products once you are registered. In other states, you must collect once you reach that state's economic nexus threshold, often $100,000 of sales into the state. When you sell through a marketplace like Etsy, Amazon or eBay, marketplace facilitator laws usually make the marketplace collect and remit tax on those sales, but you may still need to register in some states.
Is Shopify or Etsy better for a new online store?
Etsy brings existing buyers looking for handmade, vintage and craft items, so it is easier to get first sales, but you pay per-listing and per-sale fees and have less control over branding. Shopify gives you your own store and customer list for a monthly subscription, but you have to bring all the traffic yourself. Many sellers start on Etsy to validate products, then add their own store.
What products sell best online for beginners?
Products that are light, durable and easy to ship, have a clear target customer and allow a healthy margin after fees and shipping tend to work best. Niche items aimed at a specific hobby or need usually beat generic products competing with large retailers on price. Test a small batch before ordering large quantities, and calculate profit after all fees, not just the wholesale cost.
Should I use dropshipping or hold inventory?
Dropshipping avoids buying stock upfront, but margins are often thin, shipping times can be long and you control less of the customer experience. Holding inventory needs more cash and storage but gives better margins and faster delivery. Print on demand sits between the two for custom designs. Many stores start with a small inventory of their best-selling items and use suppliers for the rest.
Do I need to send invoices if customers pay at checkout?
Retail customers who pay at checkout get an order confirmation or receipt from the platform, which is usually enough. You will need proper invoices for wholesale orders, business customers who pay on terms, custom orders paid by bank transfer, and buyers who request an invoice for their own accounting or tax records. Keep your invoice numbering separate and consistent.
How do I handle returns and refunds in an online store?
Write a clear return policy covering time limits, condition of items, who pays return shipping and how refunds are issued, and display it on product pages and at checkout. Record every refund in your books and reduce sales tax collected accordingly. For B2B orders invoiced on terms, issue a credit note referencing the original invoice instead of editing the invoice itself.
Invoice Creator Editorial Team
Guides on invoicing, cash flow and small-business finance from Invoice Creator, operated by Next Software Development Company. Content is reviewed for accuracy against the fields our own invoice generator produces.
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