Legal Requirements for Dropshipping in the USA

If you’re starting a dropshipping business in the United States, one of the first questions you’ll likely ask is: “What are the legal requirements for dropshipping?”

The good news is that dropshipping is 100% legal when done the right way. You just need to follow a few key regulations to protect yourself, your business, and your customers.

In this post, I’ll walk you through the most important dropshipping legal requirements in the USA, including business registration, tax compliance, supplier agreements, and customer protection laws, so you can build a legitimate, profitable store with confidence.

Is Dropshipping Legal in the USA?

Yes, dropshipping is legal in the United States. It’s a business model where you sell products online without holding inventory. When a customer makes a purchase, your supplier ships the product directly to them.

The legality of dropshipping depends on how you operate, not the business model itself.

You must comply with:

If you follow the right procedures, you can run a fully compliant dropshipping business that’s built to last.

1. Register Your Business

The first step is to make your dropshipping store a legitimate business entity.

You don’t need to register right away when testing your niche, but once you’re ready to start selling, you should form a business.

Here are your options:

• Sole Proprietorship: The simplest setup, but offers no personal liability protection.
• LLC (Limited Liability Company): The most popular option for dropshippers since it separates your business and personal finances.
• Corporation (C-Corp or S-Corp): Typically used for larger companies with multiple owners or investors.

You can register your business through your state’s official website or through a service like LegalZoom or Northwest Registered Agent.

2. Get a Federal EIN (Employer Identification Number)

An EIN is a federal tax ID issued by the IRS. Think of it like a Social Security number for your business.

You’ll need an EIN to:

You can apply for an EIN for free directly on the IRS website. It takes less than 10 minutes.

3. Apply for a Reseller’s Permit (Sales Tax Certificate)

A reseller’s permit (or sales tax certificate) allows you to buy products from your suppliers tax-free, since you’ll be charging sales tax to your customers instead.

Without this document, suppliers may charge you sales tax on every wholesale order, which cuts into your profit margins.

Each state has its own Department of Revenue website where you can apply for a reseller’s permit.

For example:

• If your business is based in Florida, you’d apply through the Florida Department of Revenue.
• If you’re based in California, you’d apply through the California Department of Tax and Fee Administration (CDTFA).

Once approved, provide your permit to all your U.S.-based suppliers.

4. Understand Sales Tax Laws

Sales tax can be confusing, but here’s the simple version:

You are required to collect sales tax in any state where your business has a nexus, meaning a physical or economic presence.

Examples of nexus:

If you have nexus, you’ll collect sales tax from customers in that state and remit it to the state’s Department of Revenue.

Tools like Shopify Tax, TaxJar, or Avalara can automate this process for you.

5. Draft a Refund and Return Policy

Having a clear and fair return policy is both a legal requirement and a customer trust signal.

Your policy should include:

Make sure your policy complies with your suppliers’ terms. If your supplier requires that returns go directly to them, outline that in your store’s policy.

You can publish this on your Refund Policy page and link to it in your website footer.

6. Avoid Copyright and Trademark Violations

Never sell products that violate copyright or trademark laws.

That means avoiding:

Even if your supplier lists these items, you’re still responsible for what’s sold in your store. Stick with authorized U.S. suppliers and legitimate brands.

You can verify brand ownership and trademark status using the United States Patent and Trademark Office (USPTO) database.

7. Protect Customer Data and Privacy

Dropshipping stores collect personal information such as names, addresses, and payment details. You must comply with data privacy regulations like:

Here’s how to stay compliant:

Shopify and most major eCommerce platforms include built-in privacy protection tools to help with this.

8. Maintain Transparent Supplier Agreements

Work only with authorized suppliers who provide clear terms regarding fulfillment, pricing, returns, and warranties.

Having written agreements (even if via email) ensures:

• You’re protected if a supplier fails to ship or ships defective products
• Both parties understand responsibilities regarding returns and refunds

Transparency here will help you avoid legal disputes and build a stronger brand reputation.

Final Thoughts

Dropshipping can be one of the simplest ways to start an online business, but it’s still a real business. That means following real legal requirements.

To recap:

Once you set these foundations, you’ll be able to build a long-term, compliant, and profitable dropshipping business that’s ready to scale.

If you want a complete walkthrough of how to build your store from scratch, including how to handle legal setup, find suppliers, and get approved, join my free training at DropShipLifestyle.com/webinar