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There are laws governing dropshipping. You may think since it can all be done in the internet that it may all be free of charge. Since it is a business then certain rules and regulations must apply for everyone’s protection and best interest. We don’t want to run a fly-by-night operation.

There are federal and state laws to consider. The first question that comes to mind is what law covers dropshipping? Is this actually a legitimate form of business? Yes, it is legitimate and the laws governing it are those used in the mail-order business.  The government agency overseeing this is the Federal Trade Commission.

One of the salient rules to take into account is that anyone engaging in business with products that are advertised for sale be it done through mail, computer, or telephone is under the assumption that the product can be shipped within a reasonable period of time. If you do not happen to state in your advertisement the time frame involved in delivery the belief is the goods can be shipped in 30 days. So be careful with this rule.

This does not mean that you cannot ship a good over 30 days. Based from the National Mail Order Association, there must be a request coming from the dropshipper for the consent of the customer to accept order not shipped by the allowed time specified and also in this case if the customer wants, a refund must be given.

Since there is a sale involved in the transaction then of course there is the applicable sales tax law to take into account. In most instances you’ll be required to collect sales tax on any product sold in your state.  Look at the applicable website in your state for information on sales tax regulation.  For filing sales tax returns you must also apply for a state tax identification number.

Legitimate wholesalers will also ask for your federal employer ID number (EIN). For tax purposes this is used by the government to identify your business. Go to the Internal Revenue Service website and see where you can apply online for your EIN.

Before getting into the drop shipping business first contact your state department revenue services to know all the requirements needed (including licenses) to operate the business.

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