A question that gets asked a lot within the online world, especially surrounding DropShipping, is is DropShipping legal, or sometimes is DropShipping illegal?
It's a good question, especially due to the fact it can seem complicated or confusing considering the cross border nature of DropShipping.
What Is Dropshipping?
Let's start with this first point, as some may not know what DropShipping is, or what it means.
DropShipping is a term used to describe a fulfilment method, usually meaning that a seller rarely has to see or touch a product that they have sold. The seller does not keep inventory and the products are purchased directly from the manufacturer or sometimes a third party who deal with packaging and shipping items to customers.
It's a great business model for those with limited space to store inventory or who don't fancy working out the logistics of transporting orders to courier outlets or who cannot have delivery companies coming to pick up items.
It's also usually a lot cheaper to send out from supplier or 3rd party distributors because of the volume they send out each month means they can get much better rates on shipping.
Due to the model, and the fact that items are not usually stored within the country they may have been purchased from (as is much of the internet these days) complications arise around how legal DropShipping is.
Is DropShipping Legal?
The short answer is, yes, it's simply a fulfilment model that has seen an increase in popularity over the last few years.
There are currently no laws or even policies in place that stop or state that the DropShipping model is illegal. But they do provide laws and legal practices around starting an online business, including eCommerce businesses.
For example in the UK, you need to register your Business with companies house, register for VAT (if you are claiming back that cost or generating over a certain threshold) and of course need to declare your income, as do any businesses.
It's always worth checking with your local tax office or seek out an eCommerce business specialist within your country to ensure you meet the basic requirements for setting up a eCommerce store. The US for example require reseller permits and their tax laws can be quite tricky, depending on the sate.
I would always say check with an accountant and relevant lawyers or solicitors within your country, it pays to be safe and be covered!
It's also worth checking out any insurance you may need to purchase to cover yourself, because even if you don't have the inventory or stock, you are still selling products and you may be held responsible for those sales, even if you are in another country.
DropShipping itself may not be illegal, but it can come with challenges and issues associated with it, as with any eCommerce business.
What Legal Issues Might You Face When DropShipping And How To Reduce The Effects
This is not to say that you won't find yourself in legal issues, as with any business there is a risk that you will run into hot water, so I will also look through a few practises to reduce that risk.
Counterfeit Products
An issue I have seen many students, new Dropshippers and even experienced eCom experts get into trouble with is the selling of counterfeit or fake products.
Many will look on sites for 'good deals' not realising the fact the products they are looking at are not licenced by the licence owner and as such are counterfiet.
They will usually be of much lower quality, due to not having a the original designs, moulds or even product spefifications to go on when creating or building these products.
It's worth always checking these suppliers out, ensuring that they have the correct paper work and own the licences to make your products. You can check with the relevant brand and licence holder which manufacturers are allowed to create their items.
Another way to potentially remove the risk of counterfeit products is to use services such as Salehoo. Be sure to check out the full review of their services here.
Taxes & Income
As with any business, not sorting out your taxes can lead you to end up in a whole heap of trouble. As I have said above, talking to a local accountant can save a lot of hassle, especially getting to grips with if you need to pay anything for selling in other countries or ensuring you have the correct licences.
Don't try and get started without ensuring that everything is set up correctly.
Missing Licences Or Reseller Rights
Some countries require you to have written permission to sell products or reseller rights to sell certain products such as particular companies, including Disney or Marvel.
If you don't have these rights or permission to sell products in other countries you may receive warning letters or cease and desist notifications from rights holders.
Conclusion
As you can see, DropShipping is legal and a real business model, but does come with a few issues that you have to overcome on occasion.
You should always ensure you have the right suppliers, that have been vetted, you have the right licences or permissions to sell products and that you are selling real products that have not been counterfeited or faked.
There are lots of sites that provide you with this information, for me I used Salehoo combined with either AliDropShip or Shopify to host the sites, depending on the type of store or who I was working with.
Shopify provides you with a 14 day free trial which means you can get started with your DropShipping journey without having to break the bank.
I started this blog around 2017, after realising that I wanted to let people know about all the different ways someone could make money online. From DropShipping, Affiliate Marketing, Network Marketing and more.
This blog has now grown to review and explain a variety of different tools and platforms, in the bid to help you.
This blog contains affiliate links, and I will get a commission for purchases made through these links. It doesn’t change anything for you and will on occasion save you money! Enjoy, James.
I always thought it was illegal.