Is Dropshipping Legal? What US Law Actually Requires in 2026

By the editorial team · Updated 26 September 2026 · 10 min read

Yes, dropshipping is legal in the United States. No federal or state law bans selling a product that a supplier ships directly to your customer. What makes a store legal or illegal is not the model; it is how you run it: whether you ship on time, tell the truth in your ads, collect sales tax where you owe it, and sell products you have the right to sell.

This guide walks through each of those rules for a US seller, with the official source behind every one. It is general information, not legal advice: for your specific situation, talk to a licensed attorney or a CPA.

Why the dropshipping model itself is legal

Dropshipping is just a fulfillment method. You sell, your supplier stores and ships. Amazon, Walmart and thousands of established retailers ship some products straight from the manufacturer. Nothing in US law requires a seller to hold inventory. If you are new to the model, start with what dropshipping is and how it works.

The catch is simple: in the eyes of the law and of your customer, you are the seller. Your supplier is invisible to the buyer. When a package arrives late, broken or not at all, the customer, the FTC, your state attorney general and your payment processor all look at you, not at a factory in Shenzhen.

So "is dropshipping legit?" has two answers. As a business model, yes. As a specific store, it depends on the practices below. Most of the "dropshipping is a scam" reputation comes from stores that broke these rules, and that is also what regulators go after.

Rule 1: ship when you said you would (the FTC Mail Order Rule)

The FTC's Mail, Internet, or Telephone Order Merchandise Rule (16 CFR Part 435) is the rule most dropshippers have never heard of and the one they break most often. It says:

You must have a reasonable basis to believe you can ship within the time you advertise.
If your site states no shipping time, you must ship within 30 days of the order.
If you cannot ship on time, you must send a delay notice offering the customer a new date and the option to cancel for a full refund.
If the customer cancels, or you cannot ship, refunds are due within 7 working days (one billing cycle for store credit).

The FTC can seek civil penalties of more than $50,000 per violation under this rule. For a dropshipper, "reasonable basis" means you actually checked your supplier's processing and shipping times before writing "Fast shipping" on your product page. If your supplier ships from overseas in 10 to 20 days, write that. Promising 3-day delivery on a product that takes three weeks is exactly what the rule targets.

Rule 2: no fake reviews, no fake claims

The FTC Act (Section 5) bans unfair or deceptive practices, and since October 21, 2024, the FTC's Rule on the Use of Consumer Reviews and Testimonials (16 CFR Part 465) spells out what that means for reviews. It prohibits:

Writing, buying or selling fake reviews, including AI-generated ones or reviews by people who never used the product.
Paying for reviews on the condition that they are positive.
Hiding negative reviews while presenting the rest as all reviews.
Buying fake followers or views to look more popular.

Violations can bring civil penalties per violation. For dropshippers, the classic trap is importing hundreds of reviews from a supplier's AliExpress listing and displaying them as if they were written by your own customers. Other deceptive claims to avoid: fake "only 3 left" countdowns, "was $99, now $29" when it was never sold at $99, "Made in USA" on an imported product, and health claims you cannot back up.

Rule 3: taxes, duties and a real business setup

Sales tax after Wayfair

Before 2018, you generally only collected sales tax in states where you had a physical presence. In South Dakota v. Wayfair (2018), the Supreme Court allowed states to require remote sellers to collect tax based on sales volume alone, known as economic nexus.

Today almost every state with a sales tax has an economic nexus threshold, most often $100,000 in annual sales into that state. Some states also used a 200-transaction test, but a growing number have dropped it. What this means for you:

In your home state, you usually need a seller's permit before your first sale.
As your sales grow, track them by state. Once you cross a state's threshold, you register and collect there.
Many suppliers will ask for a resale certificate so they do not charge you sales tax on your wholesale purchase. Ask your supplier what they need.
If you sell through a marketplace like Amazon or eBay, marketplace facilitator laws usually make the platform collect the tax. On your own Shopify store, it is on you.

Thresholds change often, so check each state's department of revenue, not a blog post.

Import duties and the end of de minimis

For years, packages worth $800 or less entered the US duty-free under the "de minimis" exemption. That is over. Executive Order 14324 suspended duty-free de minimis treatment for all countries on August 29, 2025, and CBP codified the suspension in rules published on June 24, 2026.

In practice: if your supplier ships from China or anywhere else abroad directly to your US customer, that package now owes duties, and depending on the carrier someone has to pay them. If the customer gets a surprise bill at the door, you will get refunds and chargebacks. Before you list a product:

Ask your supplier whether duties are prepaid (DDP) in the shipping price.
Include duties in your cost when you calculate your margin.
Consider US-based suppliers; see how to choose a dropshipping supplier in the USA.

Tariff rates change frequently. Check CBP before relying on any number.

Set up as a real business

You can legally start as a sole proprietor in most states, but you still need to:

Register a business name (DBA) if you do not sell under your own legal name.
Get the permits your state and city require, including a seller's permit.
Report your income. The IRS taxes profit from dropshipping like any other business income, including self-employment tax.
Consider an LLC once you have real sales: it separates your personal assets from business debts and lawsuits. It does not protect you from your own illegal acts.

Your store also needs clear pages: a privacy policy (and, in states like California, consumer privacy rights), refund policy, shipping policy and terms of service. The details of those pages are covered in our dropshipping legal compliance guide.

Rule 4: trademarks, counterfeits and product safety

This is where dropshipping stops being a compliance problem and becomes a criminal one.

Counterfeits: selling fake branded goods is trademark infringement and, when done knowingly, a federal crime. Under 18 U.S.C. § 2320, a first offense can bring up to 10 years in prison and a $2 million fine for an individual. A "designer" bag at $19 from an unknown supplier is a counterfeit.
Brand names and images: using a brand's logo, product photos or name in your ads without permission can get your ads rejected, your store taken down, or a lawsuit.
Product safety: children's products sold in the US need a Children's Product Certificate based on third-party lab testing (CPSC rules). Toys with small parts, cribs, and anything designed for children 12 and under are high risk. Electrical products and cosmetics also have their own rules.

If you cannot prove a product is authentic and compliant, do not sell it. That rule alone removes most legal risk.

Legal vs illegal: a quick table

Legal	Illegal or high-risk
Selling a product your supplier ships directly	Selling counterfeit or replica branded goods
Showing real shipping times (e.g. 8 to 15 days)	Promising 3-day delivery on 3-week shipping
Displaying reviews from your real customers	Importing supplier reviews or buying fake ones
A real, time-limited discount	A "was $99" price that never existed
Marking up a product you bought for $8 to $29	Hiding the total cost, duties or recurring charges
Collecting sales tax where you have nexus	Ignoring nexus once you cross a state's threshold
Using your own photos and videos	Using a brand's logo or photos without permission

The concrete risks when you get it wrong

Most beginners imagine jail. The real risks are more boring and much more likely:

Payment account freezes. Stripe, Shopify Payments and PayPal watch your dispute rate. Late shipping and misleading ads generate chargebacks, and processors can hold your funds or close your account. For most small stores, this is the first thing that goes wrong.
Ad account bans. Meta and TikTok reject or ban accounts that run misleading claims or trademarked content.
Refunds you cannot recover. Your supplier will not always refund you when the customer gets their money back.
Regulator action. The FTC and state attorneys general go after patterns: many complaints, fake reviews, missed shipping times.
Civil lawsuits from brands for trademark or copyright infringement.

Many "dropshipping scams" are simply stores that ignored rules 1 and 2. Our guide to dropshipping scams shows how to avoid being one, and how to avoid being scammed yourself.

Checklist before you launch

Business registered (sole proprietor or LLC), seller's permit in your home state
Real shipping times checked with a test order, and written on every product page
Duties included in your price or prepaid by your supplier
No counterfeit, no brand logos, no protected product names in your ads
Children's products and electrical items have their required certificates, or you skip them
Only real customer reviews on your store
Refund, shipping and privacy pages written for your store, not copied
A spreadsheet tracking sales by state for sales tax nexus
A plan for delay notices and 7-working-day refunds

When you are ready, our step-by-step guide on how to start dropshipping picks up from here. Checking a product's demand, margin and competition before you test it, as the Dropshipping Hero app does, also helps you avoid products that are risky from the start.

Frequently asked questions

Is dropshipping legal in the USA?

Yes. It is a legal fulfillment method at the federal level and in every state. You must follow the same consumer protection, tax and trademark rules as any online retailer.

Is dropshipping legit or a scam?

The model is legit. Individual stores become scams when they misrepresent shipping times, products or reviews. The legal duties are on the seller, whoever ships the package.

Do I need an LLC to start dropshipping?

No. You can start as a sole proprietor in most states. An LLC adds liability protection and is worth considering once you have regular sales. You still need any required permits and must report your income.

Do I need a business license to dropship?

Often yes. Most states require a seller's permit to collect sales tax, and some cities or counties require a general business license. Check your state and local government sites.

Can I go to jail for dropshipping?

Not for dropshipping itself. Criminal exposure comes from knowingly selling counterfeit goods, fraud, or deliberately never delivering orders.

Can I use AliExpress reviews on my store?

No. Presenting reviews from another listing as your own customers' reviews is deceptive under FTC rules. Show only reviews from people who bought from you.