The Impact of Increasing Business License Enforcement
ComplianceFebruary 15, 2023

The impact of increasing business license enforcement

Regulation of business licenses is increasing, as are enforcement actions against business license violations. These developments have made business license management an organizational imperative.

At the same time, regulatory agencies are de-emphasizing their role in providing renewal and compliance notifications. It is up to organizations to understand business license requirements and to see that these obligations are met on time.

To help ensure that your business remains compliant and free from penalties or disruptions, it's important to be aware of all regulatory requirements at the federal, state, and local levels.

Increased scrutiny for certain industries

Certain industries have faced increased scrutiny and business license enforcement, examples of which include contractor, cannabis, and short-term property rental businesses.

  • Contractor licensing crackdowns typically arise during the rebuilding efforts following natural disasters. These events can draw contractors from foreign states who may not hold the appropriate licenses in the state in which they plan to operate. For example, following Hurricane Ian in 2022, Florida began cracking down on unlicensed contractors who solicited or engaged in repair work. In North Port, law enforcement arrested six people in an undercover operation targeting unlicensed contractors.
  • Short-term/vacation rentals have been the subject of increased regulatory efforts for the better part of the last decade with cities largely taking one of two routes: an outright ban or special licenses and restrictions for this sort of revenue generator.
  • The budding retail recreational cannabis industry has also sparked an increase in audits and business license enforcement, especially in cities like New York. After handing out three dozen retail licenses in late November 2022, NYC officials are now confronted with how to shut down a growing unsanctioned market. City Hall launched a task force to combat illegal cannabis sales. In one week alone, police and government agencies seized close to 100,000 packages, cartons, and other cannabis products, totaling approximately $2.5 million. The clampdown also resulted in two arrests, over 300 civil violations, and more than 30 criminal court summonses.

Municipalities are taking a firm line on business licensing

Another trend is that municipalities are taking a firm stance on business license requirements and compliance.

Take for example, Mesa, Arizona, where city council introduced an ordinance that requires all persons conducting business in Mesa to obtain a business license and be prepared to present them to “any city official,” upon request.

As a result of an increase in audits of businesses and subsequent recovery efforts, local governments are even hiring third-party collection and enforcement firms to keep pace. In Georgetown, South Carolina, officials hired a third-party firm to recoup lost revenue from businesses operating without a license.

Other localities are embracing a deterrent approach whereby businesses who violate business licensing laws are publicly shamed. For example, the city of Santa Monica, California, maintains an online delinquent taxpayer list for businesses that have failed to resolve noncompliance issues in a timely manner.

It's an evolving landscape and your business must stay aware of the implications of non-compliance.

How larger business licensing trends impact planning and operations

E-commerce has posed a question for businesses. If a company sells products to residents of a state — yet has no physical presence within the state's borders — should sales taxes still apply?

The U.S. Supreme Court addressed this issue in South Dakota vs. Wayfair. The Court held that states could require online or remote sellers to collect and remit sales taxes on goods and services, even if the seller has no in-state physical presence.

This decision means that a state can require remote sellers to register for sales tax licenses and to collect taxes on the sale of goods and services if those businesses meet the state’s definition of sales tax or economic nexus.

The implication of remote work on business license requirements

Having remote workers presents similar issues, depending on state and local laws. Companies with out-of-state employees must determine where and how to properly withhold payroll taxes. Meanwhile, remote workers must also stay current on the licensing requirements of their jurisdiction, as some municipalities require workers to obtain home occupation permits.

Businesses must remain aware of state income tax nexus considerations. In this situation, a tax nexus can occur when an organization does business in a state other than its primary physical headquarters. Having remote workers in a secondary state may subject a business to that state's sales, income, and tax laws. Having remote workers may also make it necessary for businesses to register with the specific tax department in the jurisdiction where these workers live. 

business licensing infographic image
The what, why, when and who of compliant business licensing
Handling the risks of changing regulations and increased enforcement

Addressing routine business license compliance challenges

An intricate web of federal and state regulations, and local rules at the county, city and town level, governs business licensing. These requirements are not only extensive but are also fast-evolving. It's estimated that 65 percent of license, tax and permit registration requirements change annually. Meanwhile, there are more than 75,000 federal, state and local jurisdictions for businesses to contend with.

Other challenges can also increase the complexity of maintaining compliance. These include coordinating between multiple office locations, increased burdens within industries that are especially highly regulated, inefficient internal systems and a lack of needed information.

Additionally, there are common events that warrant increased licensing work. Such events include corporate name changes, adding new products or services, company expansion, management or ownership changes, physical address changes, offices opening or closing and regulatory changes.

The risks of licensing non-compliance

The consequences of licensing non-compliance can be profound. Obvious drawbacks include financial penalties and interruptions in business operations.

Yet there are also consequences that may be less known but just as damaging. Licensing non-compliance can throw a wrench into key strategic business decisions, delay the opening of new locations, or result in company leaders being summoned to appear in court.

In years past, some organizations were inclined to follow a "pay fines as you go" philosophy. Today, that approach carries much more risk. Because business licenses are public documents, failing to stay compliant could lead to negative publicity and reputational harm.

Easily manage complex requirements
There are over 75,000 federal, state, and local jurisdictions.  As their compliance requirements become more complex, we’re the partner that can help you manage them all.

Preventing licensing non-compliance

Given the complexity of business license compliance, the large number of authorities involved and the ever-changing nature of requirements, remaining compliant is no small task. With increasing penalties for non-compliance, it makes sense to establish the right processes for monitoring and managing business license compliance.

For most organizations, this means choosing between self-management, working with a trusted compliance partner, or going with a blended model. Understanding the various requirements of each approach is key to determining the right approach.

Self-management for business licensing

Self-management requires you to take an active role in remaining compliant, so this approach generally works best when supported by advanced business license software. Software enables greater workflow efficiency and accuracy than is possible with simple spreadsheets. The right software will also typically offer features such as calendars and alerts, helping to ensure that critical deadlines are never missed.

CT's business license software solution is designed to support self-management in a simple and seamless manner. You supply verified and validated license data, and CT enters that information into our business license tool. Due to the complexity of the business license compliance, during this build phase we consult with you and customize the interface. The goal of engaging with technology is to ensure that anyone who touches the process can quickly and accurately gain visibility into business license compliance. It must be user-friendly yet complex enough to manage the ever-changing compliance regulations.

It is important to realize under this model, you must continue to research renewal requirements prior to each submission and pursue status updates, license records, and fee renewal requests.

Managed business licensing

A managed licensing solution is a more robust offering that allows you to leverage a compliance partner to meet all requirements. In such scenarios, you benefit from the experience of compliance specialists who oversee the entire life cycle of a business license portfolio — without having to give up control or transparency. You can provide access to unlimited users and have access to real-time status for any of their licenses.

With a managed approach, CT verifies the status of all licenses and the data associated with existing license lists. A dedicated service team is also tasked with helping secure, complete, file, and pay for various licenses to relevant jurisdictions.

Pre-filing summaries are provided each month with upcoming renewals. These summaries include requests for any necessary supporting documents.

When using a managed business licensing model, you simply approve renewals and provide supporting data when necessary. Because this is a comprehensive solution, it streamlines costs, frees up administrative time and lowers the risk of non-compliance.

Combining self-managed and managed licensing

Due to the complexity of license obligations, some organizations may opt for a blended model that combines the two approaches outlined above. The approach may be best suited for when the license requirement is more of a financial income tax or is in a highly regulated area requiring more attention that it does not produce efficiency in outsourcing. In such cases, you can maintain your internal management processes while outsourcing specific licensing tasks to third-party experts.


Creating a compliance plan and developing a strategy to ensure the compliance portfolio offers long term protection is key to lowering risk due to non-compliance. Compliance begins with proper and extensive research into the licensing requirements applicable to your business operations in every location. This is a critical — yet often very difficult — part of running a multi-jurisdiction operation. Most organizations are now conducting an evaluation of their internal processes.

Creating the path to compliance is not easy. It takes commitment and patience. Many companies struggle with identifying who is handling certain tasks. They don’t have a comprehensive list of what's required or are simply plagued with turnover and the lack of ownership. By formulating the right strategy — and supporting it with the necessary tools — you can lay the foundation for ongoing business success.

Learn more

To learn more about how CT Corporation can help you manage your business license needs, contact a CT Corporation Service Representative or call (844) 878-1800.

Troy Ayala
Compliance Business Consultant

Troy Ayala is a Compliance Business Consultant for CT Corporation. His responsibilities include research, delivering onsite training, and assessing CT Corporation customer workflow management for all transactions, including entity management.

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