Dropshipping Compliance Checklist for 2025

If you want to build a profitable dropshipping business that lasts, compliance isn’t optional, it’s essential.

Many new dropshippers skip this part because they think setting up a business “the right way” is too complicated. The truth is, getting compliant is simpler than most people think. You just need to follow a clear, step-by-step process.

In this post, I’ll share a complete Dropshipping Compliance Checklist for 2025 that covers everything from registering your business to handling taxes and working with suppliers legally.

Why Compliance Matters in Dropshipping

Let’s start with why this is important.

Being compliant doesn’t just protect you from legal issues. It:

If you’re serious about growing your dropshipping store into a real business, compliance is non-negotiable.

✅ Dropshipping Compliance Checklist for 2025

Here’s everything you need to legally operate and scale your dropshipping business in the U.S.

1. Register Your Business

The first step is to choose your business structure and register it in your home state.

The most common options are:

• LLC (Limited Liability Company) – offers legal protection and credibility
• Sole Proprietorship – best for testing an idea but not ideal long-term
• Corporation – suited for advanced sellers or those with multiple stores

Once registered, you’ll receive your business documents, which you’ll need when applying for supplier accounts.

Pro tip: Suppliers take you more seriously when they see a registered business name.

2. Get an EIN (Employer Identification Number)

Your EIN acts like a Social Security number for your business. You’ll use it to:

• Open a business bank account
• File taxes
• Work with suppliers

You can apply for an EIN directly on the IRS website for free, and it only takes a few minutes.

3. Apply for a Reseller’s or Sales Tax Permit

To legally collect and remit sales tax, you’ll need a reseller’s permit (also called a sales tax permit) from your state’s Department of Revenue.

This allows you to:

• Buy products from suppliers without paying sales tax
• Collect sales tax from customers in states where you have nexus

If your supplier is located in the same state as your customer, you’re typically required to collect sales tax on that sale.

4. Understand Sales Tax Nexus

Sales tax nexus means you have a taxable connection to a state. You create nexus when:

• You live in the state
• You have a supplier shipping from that state
• You exceed that state’s sales or transaction threshold (usually $100,000 or 200 transactions)

Use tools like TaxJar or Avalara to automatically track where you owe sales tax and stay compliant.

5. Create a Business Bank Account

Separate your personal and business finances. This helps with bookkeeping, taxes, and protecting your personal assets.

Use your LLC documents and EIN to open a business checking account. You can also connect this to your Shopify payouts and ad accounts for easy tracking.

6. Draft Clear Store Policies

Every legitimate dropshipping store needs:

• Refund Policy
• Shipping Policy
• Privacy Policy
• Terms & Conditions

These should clearly explain how you handle orders, returns, and customer data. You can use Shopify’s built-in templates or customize them to reflect your store’s operations.

Transparent policies build trust and protect you from disputes or chargebacks.

7. Work With Real Suppliers

Avoid middlemen and unauthorized distributors. Instead, apply directly to brand-authorized suppliers or U.S.-based distributors.

Here’s what to ask before partnering with a supplier:

• Where are your warehouses located?
• What are your shipping and return policies?
• Do you require a reseller certificate?

Building real supplier relationships not only keeps you compliant but also improves fulfillment speed and customer satisfaction.

8. Get Business Insurance

A general liability insurance policy protects your business from potential lawsuits or product-related claims.

While not legally required, many high-ticket suppliers will ask for proof of insurance before approving your account.

You can get affordable eCommerce insurance from providers like Hiscox or Next Insurance.

9. Keep Accurate Financial Records

Good bookkeeping is key to staying compliant with state and federal tax laws. Track your:

• Revenue and expenses
• Product costs
• Supplier invoices
• Advertising and software subscriptions

Tools like QuickBooks, Wave, or Xero can make this process easier.

10. File and Pay Your Taxes

You’ll need to file taxes at both the federal and state levels each year. This includes:

• Income tax on profits
• Sales tax (collected and remitted to the appropriate states)
• Self-employment tax (if you’re the business owner)

If you’re earning consistent income, consider paying quarterly estimated taxes to avoid penalties.

Common Compliance Mistakes to Avoid

Even experienced dropshippers make these mistakes:

Avoid these and you’ll already be ahead of 90% of dropshippers who get tripped up early.

Final Thoughts

Compliance may not be the most exciting part of building a dropshipping business, but it’s one of the most important.

When you take the time to set things up properly, business registration, tax permits, supplier approvals, and insurance, you’ll have the confidence to focus on growth without worrying about legal issues.

So use this checklist as your roadmap to launching a legitimate, high-ticket dropshipping store that’s built to last.

And if you want my full step-by-step system for building a compliant, profitable business, join my free training at DropShipLifestyle.com/webinar.