Here is the USDA requirement for exemptions to the USDA licensing laws:
http://www.aphis.usda.gov/ac/dealer/exemptions.pdf
If you have have
3 or less breeding females and only sell for pet or exhibition you are exempt from licensing.
You can also be exempt if you have less than $500 gross income from the sales. Since it says gross and not net, I doubt anyone selling Yorkies could use this one.
Cities, counties, and states may have additional laws, but the USDA licensing requirements would not be superceded by them. They can make additional requirements just not reduce the requirements.
I did see where raising and retail selling of dogs for hunting, security, guarding are exempt from licensing. Hmmmmm..... I know mine will bark up a storm for any unknown intruder, so they must be security dogs.
