Dropshipping is Dead in the US Due to New Law

Nov 17, 2024 | Dropshipping | 0 comments

Dropshipping has been a popular business model for many entrepreneurs looking to start an online store without the hassle of holding inventory or shipping products themselves. However, a new law in the United States has just dealt a major blow to this practice, effectively killing dropshipping as we know it.

The new law, known as the E-Fulfillment Service Provider Act, requires online retailers to collect sales tax on all goods sold in the US, regardless of whether the retailer has a physical presence in the state. This means that dropshippers, who typically do not hold inventory and rely on third-party suppliers to ship goods directly to customers, will now have to navigate the complex system of collecting and remitting sales tax for each state in which they make sales.

For many dropshippers, this added burden of complying with sales tax laws is simply too much to bear. The costs associated with tracking and collecting sales tax for each state, as well as potential penalties for non-compliance, make dropshipping far less attractive as a business model. As a result, many dropshippers are now considering alternative business models or shutting down their operations altogether.

The E-Fulfillment Service Provider Act is a major victory for brick-and-mortar retailers, who have long argued that the ability of online retailers to avoid collecting sales tax puts them at a competitive disadvantage. By leveling the playing field and requiring all retailers to collect sales tax, the law aims to protect local businesses and generate much-needed revenue for state governments.

While the new law may have effectively killed dropshipping in its current form, this does not mean that online retail is dead. Many entrepreneurs are already exploring new business models that comply with the sales tax laws, such as holding inventory in a fulfillment center or partnering with local suppliers. With some creativity and adaptability, it is still possible to succeed in the ever-changing world of e-commerce.

In conclusion, the new US law has made dropshipping a much less viable option for aspiring entrepreneurs. While the future of online retail may look different in the wake of this legislation, there are still opportunities for those willing to adapt and innovate. As the e-commerce landscape continues to evolve, it is clear that staying informed and agile is crucial for success in the digital marketplace.