I live in the City of Sonoma and work out of my home providing services to customers remotely. None of these customers a located in the City of Sonoma. Do I still need a business license? If so, is there a specific category for home business?

Yes, you do need a City of Sonoma Business License. Even though you are not serving local customers, your business is operating within the City of Sonoma.

There is no specific category for home businesses, so you would select the classification/category that is applicable to the services you provide.