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Is dropshipping legal? Licenses, taxes and rules

Yes, dropshipping is legal in the US, UK, EU and most other countries. But you are the seller, with every duty an online retailer has. This checklist covers what should be done before your first sale.

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Short answer

Yes, dropshipping is legal in the US, UK and EU. As the seller you need to register your business where required, collect sales tax or VAT, publish store policies, ship within the times you state and sell only safe, genuine products. You, not the supplier, are liable to your customers.

Checklist before your first sale

  1. 1

    Register your business

    A sole proprietorship is often enough to start; many sellers later form an LLC. Check whether your city or state needs a business license.

  2. 2

    Sales tax

    In the US you collect sales tax in states where you have nexus. Shopify can calculate it, but registering and filing is on you.

  3. 3

    Store policies

    Refund, shipping, privacy and terms policies plus contact details. Selling into the EU adds a 14-day withdrawal right and an imprint.

  4. 4

    Honest shipping times

    In the US the FTC Mail Order Rule requires you to ship within the time you state, or within 30 days if you state none, and to notify buyers of delays.

  5. 5

    Product safety

    Only sell products that meet safety rules (CPSC in the US, GPSR and CE marking in the EU), especially electronics, toys and cosmetics.

  6. 6

    Import duties

    Overseas parcels can owe duties and taxes. The US suspended its $800 de minimis exemption in 2025, so check current CBP rules and who pays.

What is illegal in dropshipping

  • Selling counterfeits or copied designs, even if your supplier lists them.
  • Products without required safety certifications or labels.
  • Fake reviews, fake scarcity timers or misleading health claims.
  • Hiding delivery times or making refunds impossible.
  • Using other people's photos or videos without permission.

Taxes at a glance

  • Income tax: your profit is taxed with your other income. In the US, self-employment tax applies once net earnings exceed $400 a year.
  • Sales tax (US): collect it in states with economic nexus, often triggered at $100,000 in sales into that state.
  • VAT (UK and EU): register once you cross the threshold. For EU cross-border sales over €10,000 a year, the buyer's country VAT applies via OSS.

How 5minstore helps

5minstore.com creates templates for your store policies and shows delivery times per product. Templates aren't legal advice: have your policies reviewed or use a specialized service.

FAQ

Is dropshipping legal in the US?

Yes. Dropshipping is a legal business model. You still have to register your business where required, collect sales tax, ship within stated times and sell only safe, genuine products.

Do I need a business license to dropship?

It depends on your city and state. Many places require a general business license; you can usually apply online for a small fee.

Do I need an LLC to start dropshipping?

No. You can start as a sole proprietor. An LLC separates business and personal liability and is often set up once a store sells regularly.

Is dropshipping legal in the UK and EU?

Yes, as long as you follow consumer law: clear prices with VAT, a 14-day right to cancel, product safety rules and honest delivery times.

Who is liable for faulty products?

You, as the seller. Refunds and warranty claims run through you even when the supplier ships.

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5minstore.com editorial team · Updated: 30 October 2026. General information, not legal or tax advice.

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