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If the state requires a contractor's license, then he needs to have a license in each state he intends to work in - plus state/local business licenses as applicable.
This does not mean there are not a lot of contractors who cross state lines without proper licensing - the penalties in may cases are not real severe and are just a fine, not criminal, so many take the chance.
As you say - argh - many contractors are not really businessmen and have zero legal education, so many people get burned.
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