Is Dropshipping Illegal on Shopify? (2023) Full Guide

Dropshipping is a great way to make money online, but there are a lot of questions and misconceptions about the legality of dropshipping on Shopify. In this article, we’ll answer some of the biggest questions surrounding dropshipping on Shopify, so you can learn the facts yourself and make an informed decision.

Does Shopify Allow Dropshipping?

Dropshipping Model Diagram

The short answer is yes, Shopify does allow dropshipping. As one of the most popular eCommerce platforms, Shopify makes it easy to set up a store and start selling products without having to purchase inventory upfront.

You can use Shopify’s dropshipping features to connect your store to selected suppliers and dropship products directly to your customers.

Shopify themselves have not placed a ban on stores that drop ship, and in fact, cater their services to anyone who wants to run an online business. The first thing that we need to understand is the legality of dropshipping as a business model.

Shopify is a software platform, while dropshipping is a business model. Shopify can be used to run many different types of businesses, and dropshipping is one of them.

However, dropshipping does come with certain risks and responsibilities that you should be aware of. For example, if you’re selling products from a supplier, you’re responsible for ensuring that the product arrives on time and in good condition.

You’re also responsible for any customer service issues that arise from the product you’ve sold. While these are problems you’re going to have to deal with as a dropshipper, there will be no legal issues that come up simply because you dropship on Shopify.

Can You Get in Trouble For Dropshipping?

While you won’t get in trouble for running a dropshipping Shopify store, the business model itself can get you in trouble if you’re not careful. Because you don’t have full control over the entire product journey, problems can arise that you’re not expecting. Therefore, it’s best to identify potential issues and take precautions early so you can keep running your business smoothly.

1. Selling trademarked items without consent

Dropshipping is not illegal on Shopify unless you are selling a trademarked product without consent from the owner. If you’re found guilty of doing this, then your store could be shut down by Shopify and you will lose all of your items within a span of 24 hours.

If the owner of the brand has given you permission to use their logo/branding and it isn’t too much of an issue for them (for example, if they have no problem with you selling their products under another name), then it is perfectly legal to sell those products.

The other potential legal issues that you should be aware of are infringing on someone else’s copyrights or selling counterfeit products.

Related: Can You Sell Anything On Shopify? Find Out The Things Allowed & Not Here!

2. You may need to register your business locally

Depending on which country you’re situated in, you need to make sure that your Shopify store is registered correctly. For example, if you’re located in Canada, the government requires businesses that sell goods or services in Canada to be registered as international businesses.

This means that if you plan on selling anywhere other than Canada, then registering with them is necessary so they can keep track of your business and make sure it isn’t breaking any laws by shipping items from another country without proper licensing or approval by authorities like customs agents.

3. You need to look at the local laws of each country

Selling products that are manufactured abroad is perfectly legal as long as you follow proper customs procedures and meet all local requirements. Some countries may have laws that are strict on what can be imported from other countries, so it’s best to check with each country’s local customs office before trying anything new.

While there are certain general principles that are applicable across the board, local laws and regulations can vary significantly from one jurisdiction to the next. For example, it is essential to be familiar with local taxes in order to ensure compliance, as failure to pay the required taxes or remit them correctly can result in significant penalties and fines. Additionally, correctly paying and filing taxes can save you from potential legal liability down the line.

4. Familiarize yourself with supplier restrictions

You need to remember that there are certain restrictions when it comes to dropshipping. For example, some suppliers may require a minimum order quantity or may not ship to certain countries. You should make sure you familiarize yourself with the terms and conditions of the suppliers you’re working with, so you don’t run into any legal or compliance issues down the line.

Do I need a registered business to dropship on Shopify?

No, you don’t need to have a registered business to dropship on Shopify. But, this ultimately depends on which country you’re situated in. Some countries require any online business to identify if their selected name is available for use, and if so will need to be registered.

It’s also important to note that you may be required to register for certain taxes if you’re selling products in certain countries. Additionally, you should make sure that you’re familiar with your local laws and regulations, as well as any rules or restrictions imposed by Shopify.

Additionally, depending on the country you’re selling in, you may need to register for certain taxes or VAT. This is especially important if you’re selling products to customers in the EU, as you’ll need to register for VAT if you’re making more than a certain amount of sales.

RELATED: Do You Need An LLC for Shopify?

How can I legally drop ship?

1. Read up on all the laws and regulations

The best way to make sure you’re legally dropshipping is to read up on the laws and regulations of importing and exporting goods in your area, as well as any rules or restrictions imposed by Shopify in your locality.

And to reiterate, it’s vital that you understand and fully comprehend the terms and conditions of the suppliers you’re working with, so you’re not infringing on anyone else’s copyright or selling counterfeit products.

2. Make sure all transactions from suppliers to customers are handled legally

You also need to make sure that you have the right contracts and agreements in place with your suppliers. This will ensure that you’re both on the same page when it comes to shipping times, product quality, and customer service.

Additionally, take some time and make sure that you have the right processes in place for handling customer service issues, so you can provide a good experience to your customers. If you’re constantly getting bad reviews, complaints can be made to Shopify which can result in your store being penalized or closed down.

3. Understand local taxation laws and procedures

In some countries like Australia, Canada, and New Zealand, it’s perfectly legal for anyone to sell their products through an online store as long as they don’t charge tax or any other fees on top of the price of the product. But, in other countries such as the United States and France, it is not so simple and can place you in legal trouble, even if you unknowingly broke the law.

Dropshipping itself is not a difficult business, but you need to be prepared for the common hurdles that most drop shippers face. As long as you do your due diligence and don’t rush the business proceedings, running your store on Shopify is perfectly legal and safe.

It might be best to start off small marketing to only a couple of countries before you move on to larger-scale operations. This will give you more time to learn the business and understand international business laws.

Two important points that you should always keep in mind when running a dropshipping store are:

  • You can dropship as long as you have a written contract with your supplier, meaning no false advertising and no misrepresentation of quality.
  • If the product has been manufactured for sale in the country where it was purchased, then it may be considered an import or export product and therefore subject to customs duties.

Final Thoughts

So, is dropshipping illegal on Shopify? The resounding answer is no, dropshipping is a perfectly legal business model that you can run on any Shopify store.

Dropshipping can be a highly profitable business model, but as we noted it does entail some risks. You may find yourself facing high fees and long shipping times that can make it difficult to stay competitive in your industry, or you could end up dealing with unreliable suppliers who take too long to fulfill orders.

Additionally, you need to keep up with all the latest trends in the industry so you can remain competitive and keep your customers happy. Finally, there is always the risk of having to deal with returns, refunds, and other customer service-related issues that can take up a lot of your time and resources.

But, these are common problems that all drop shippers face and have nothing to do with the legality of the business model.

Hopefully, this article has given you the information you need to make an informed decision so you can start selling with confidence. So, what are you waiting for? Get started today with Shopify and start selling your dropshipped products to customers all around the world!

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