DISCLAIMER: These guides are for informational purposes only and do not constitute professional legal advice. See more at the end of this article.
Starting a new business can be expensive. Even if you don’t manufacture your own goods or sell them at a retail store, you’ll still likely need to pay for storage space, shipping costs, and a host of other overheads.
The dropshipping business model is a legal, cost-effective way to run an online store while avoiding many of these expenses. Here’s the info you need to start a dropshipping business that complies with local and national laws and regulations.
What is dropshipping?
Dropshipping is an online retail fulfillment method in which a retailer handles sales, marketing, and customer service, and third-party businesses handle manufacturing and fulfillment.
In the dropshipping model, the store accepts customer orders and forwards them automatically to a supplier, who packages and ships the items.
Dropshipping is particularly popular among ecommerce retailers, as it lowers the costs needed to start and run an online business.
Is dropshipping legal?
Yes, dropshipping is legal. It is a widely used business model in which a retailer does not keep the products it sells in stock. When a customer places an order, the retailer forwards it to a supplier or manufacturer, who then ships the products directly to the customer.
Like in any business, retailers who use dropshipping must adhere to local, national, and international laws regarding the sale of merchandise. As long as you follow these regulations, dropshipping can be a low-risk, legitimate way to run a business.
You may want to have a lawyer assess any legal agreements you enter with your dropshipping partners and third-party suppliers to clarify who has legal liability for issues arising during the sales process, the shipping process, and customer usage.
Different countries have different rules around dropshipping. For example, dropshipping in the US is legal and regulated at both federal and state levels. In the European Union, general ecommerce rules apply, which include mandatory disclosures about the seller’s identity and any additional delivery costs, especially if products are imported from outside the EU.
Before starting a dropshipping business, research the specific requirements for any countries you plan to sell in or source products from.
Legal requirements for dropshipping
- Copyright laws
- Consumer protection and product safety laws
- Truth in advertising laws
- Tax and licensing laws
- Platform-specific requirements
- Data protection laws
- Food, drugs, and alcohol regulations
- Anti-money laundering regulations
- Sanctions compliance
- Anti-slave labor regulations
Here are some legal compliance issues to keep in mind when establishing your dropshipping business:
Copyright laws
A common question among new ecommerce vendors is: “Can I get sued for dropshipping?” One potential issue to watch out for is copyright violation You may be in danger of violating copyright law if your supplier is selling counterfeit goods to fulfill your customer orders. Proceed with caution when partnering with suppliers and take any ethical concerns seriously.
Consumer protection and product safety laws
Even if you aren’t the company making a product, your online business must abide by consumer protection laws and product safety laws and is responsible for the quality and safety of goods shipped to customers. If a product you sell causes harm, you could face personal injury litigation, so it’s important to know the quality and materials your suppliers use. An important precaution is to have product liability insurance to cover you in case of any unforeseen issues
Truth in advertising laws
Dropshippers are responsible for accurately representing products in any marketing efforts. If unhappy customers buy a deceptively marketed product in an online store that uses dropshipping, they are unlikely to sue the store’s supplier. Instead, they’ll probably sue the business whose name is on the box. In the United States, the Federal Trade Commission can bring a case against companies that are seen to be misleading customers.
Tax and licensing laws
Like any retailer, dropshipping businesses must collect and remit applicable sales tax. You also must pay income tax. Many states require a business license or sales permit to operate a retail business. Contact a local legal professional if you’re unsure about licensing requirements for your area.
Platform-specific requirements
Platforms like Amazon, Etsy, and eBay have specific requirements for selling dropshipping products. Entrepreneurs can face legal issues or have their accounts removed if they do not comply with the platform’s requirements.
Data protection laws
Like any online business, dropshippers must protect customer information and follow privacy laws. If you share customer data with suppliers or use apps that handle customer information, you’re responsible for keeping that data safe. Breaking these laws can result in large fines.
Food, drugs, and alcohol regulations
Selling food, supplements, drugs, or alcohol requires special permits. Some platforms don’t allow selling these products, and there are often strict state and national rules about how to sell these online. Check local and national laws regarding the sale and dropshipping of these products before you consider starting your business.
Anti-money laundering regulations
Your dropshipping business needs to watch for suspicious purchases that might be money laundering. You need to know who your customers are and keep good records of all sales. Even if you use payment services like PayPal, you’re still responsible for preventing financial crimes.
Sanctions compliance
You can’t sell to certain countries or people that governments have banned from doing business. Check both your suppliers and customers against these ban lists. You could face serious trouble if you sell to banned countries, even by accident.
Anti-slave labor regulations
You have to know your products aren’t made using forced labor, especially when buying from overseas factories. You’re legally liable even if you aren’t making the products yourself, and ignorance about the issue isn’t a legal justification. It’s your job to check how your products are made, so ensure your suppliers are meeting labor requirements and have safe and legal manufacturing plants.
Is dropshipping legal under 18?
There are no specific age restrictions for starting a dropshipping store. However, minors cannot legally form binding contracts without parental consent in many countries. In the US, for example, anyone under the age of 18 typically needs a parent or legal guardian to:
- Sign contracts with suppliers and shipping companies
- Open a business bank account
- Register the business with state/local authorities
- Sign up for payment processing services
- Handle tax obligations
Some payment processors and ecommerce platforms explicitly prohibit users under the age of 18 in their terms of service. For instance, Shopify requires account holders to be at least 18 years old. PayPal and Stripe have similar age restrictions.
Platform-specific dropshipping requirements
Each platform has its own specific requirements for opening a dropshipping store. Here’s what you need to know:
Amazon
If you plan to start Amazon dropshipping, here are the requirements to follow:
- You must be the sole seller of record for products.
- Your business must appear as the seller on packing slips, invoices, and other information in connection with products.
- To avoid confusion, you must remove all information identifying the third-party seller before shipping the order to customers.
- You must be responsible for accepting and processing returns.
- You must follow all terms of your seller agreement and Amazon’s dropshipping policy.
eBay
If you’re planning to dropship on eBay, you have to follow these conditions:
- Own the items before listing them.
- If you don’t own the items, have an agreement with a wholesale supplier to list and sell their items.
- If using third-party fulfillment, you must:
- Clearly identify yourself as the seller on all packing slips/invoices
- Ensure safe delivery within stated timeframes
- Have a contract preventing the provider from misusing eBay order information
Etsy
Etsy prohibits dropshipping except for craft and party supplies. Reselling is also not allowed on Etsy except for the following items handpicked or sourced by sellers:
- Craft and party supplies
- Vintage items of more than 20 years old
- Gift baskets
📚 Learn more: Etsy Dropshipping: The Definitive Guide (2025)
Walmart
To dropship on Walmart, you must:
- Be an established business with verified sales history
- Have a supplier supplier that meet’s Walmart’s fulfillment requirements
- Have valid business credentials, including a tax ID
- Be able to provide GTIN or UPC codes for each product
- Have a supplier other than Walmart itself
📚 Learn more: Walmart Dropshipping: How It Works and How To Get Started
AliExpress
AliExpress allows dropshipping and includes features to help dropshippers find products to sell. Use an app like DSers to import products from AliExpress to your Shopify store in a few clicks.
Why start a dropshipping business?
Running your online store as a dropshipping business offers several advantages over a traditional retail model, freeing you to focus on specific things and leaving other details to your dropshipping partners.
The upsides to dropshipping include:
- Low startup costs. You don’t need to spend money to stock your store. Your main expense is buying products from your dropshipping supplier, which is usually done on a per-order basis after a customer buys the item.
- No need to source materials. You don’t have to worry about raw materials or supply chains. Your partner handles things like price changes on raw materials and shipping logistics.
- No warehousing or inventory management. When you outsource manufacturing, inventory management, and order fulfillment to a dropshipping partner, you no longer need to handle responsibilities.
- No shipping issues. Dropshipping partners also work with shipping carriers on your behalf to efficiently dispatch customer orders.
- Easier to develop products and change formulas. If you get into private label dropshipping, where an outside company makes a custom product on your behalf, you can save money on product development. You can also test multiple dropshipping suppliers to see whose products your customers prefer.
- Ability to focus on what you do best. With manufacturing and order fulfillment off your plate, you can focus on three crucial ecommerce business elements: marketing, store design, and customer service.
Start dropshipping with Shopify
Shopify users can connect their stores with dropshipping suppliers to automatically import product listings and submit customer orders. Find out how to start dropshipping with Shopify today.
* Please consult independent legal advice for information specific to your country and circumstances. Shopify is not liable for your use or reliance on these guides.
This post is for information purposes only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Legal requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Your local state, province, or county will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.
Is dropshipping legal FAQ
Do you need a business license for dropshipping?
A dropshipping business is a retail business. If your state or municipality requires a business license for retailers, you’ll likely need one for your dropshipping store.
Can you dropship internationally legally?
Yes, you can legally dropship internationally, but you have to pay attention to various regulations and responsibilities. When selling across borders, you become responsible for complying with both your home country’s laws and the laws of any country where you sell products.
What are the drawbacks of dropshipping?
The principal drawback of dropshipping is that it usually results in lower profit margins than traditional retail. A large portion of every sale goes to the company that warehouses and ships the items you sell. Dropshippers may also have less control over the quality of the products they sell. If a dropshipping company causes a shipping issue, the retailer is responsible for providing customer support, and may receive a negative review through no fault of their own.
What products are good for dropshipping?
Dropshipping lends itself to a wide range of products. These include apparel, jewelry, stationery, toys, home goods, pet supplies, phone accessories, and car accessories. These markets are filled with potential customers accustomed to buying products online, and vendors who know how to make and dropship these products.
Do I have to collect sales tax on dropshipped items?
Sales tax laws differ by state. If your municipality charges sales tax on retail goods, you have to collect and remit that tax on items sold via dropshipping.
