How to Start an E-Commerce Business
Build an online store from business formation through sales tax, product safety, customer protection, fulfillment, pricing and lasting operations.
Start the guide → Calculate product pricing →Choose Your E-Commerce Business Model
Choose what you sell, who owns the inventory, and who is legally responsible for delivery, returns and product compliance before selecting a storefront.
Own-stock retail
Buy and own inventory, control fulfillment and returns, but carry inventory risk.
Made-to-order
Manufacture or customize after purchase; disclose realistic production timelines.
Dropshipping
Suppliers ship orders, while the seller still needs clear responsibility for product quality, delivery and customer remedies.
Digital products
Downloadable content or software may have different sales-tax, licensing, privacy and IP obligations.
Identify customers, competitors, shipping geography, product risks, repeat purchase frequency and the limits of your supply chain. Do not assume a marketplace handles every legal duty for sellers.
Validate Demand and Unit Economics
Test realistic margins on a small assortment before buying large quantities or committing to long contracts.
- Document a specific customer problem and product differentiation.
- Estimate landed unit cost, returns, damaged shipments, fees, advertising and sales taxes.
- Calculate contribution per order and the number of orders needed to cover monthly fixed costs.
- Verify suppliers, warranties, delivery standards and counterfeit risk.
- Test demand with an honest product description and measurable conversion rates.
Federal, State, County and City Requirements
The exact rules depend on your products, physical business location, fulfillment locations, and destinations. Use this agency-by-agency process rather than a generic national license claim.
Federal
Research EIN and employer rules, FTC marketing disclosures, consumer protection and product-specific federal regulators.
State
Confirm entity registration, trade name, sales-tax permits, income/employer taxes and any regulated-product licenses.
County
Confirm business tax certificates, commercial storage, warehouses, zoning and any local permits.
City
Check home occupations, signage, pickup operations, warehousing, customer visits and fire requirements.
Open PBEF State Business Resource Directory →
Sales Tax, Marketplace Collection and Accounting
Distinguish income taxes, sales/use taxes and any locally imposed taxes. Collecting money through a platform does not automatically settle every filing obligation.
- Verify taxable product categories, exemptions, delivery charges and rates for each relevant jurisdiction.
- Check physical and economic nexus rules, state registrations and filing frequencies.
- Determine what sales tax a marketplace facilitator collects and what registrations/returns remain yours.
- Reconcile orders, refunds, platform deposits, fees, tax amounts and chargebacks monthly.
- Keep documentation for resale certificates, exempt buyers and product-specific tax treatments.
Start with your state revenue agency via the PBEF directory and the IRS small business resource center ↗ .
Product Safety, Sourcing and Intellectual Property
Selling a product online does not remove safety and labeling responsibilities. Some categories require testing, approvals, warnings, tracking or restrictions.
Safety and recalls
Check the CPSC and other relevant product regulator for standards, recalls and reporting.
Food, cosmetics and supplements
Research FDA and state rules before making health or product claims. Some items require specialized compliance.
Trademarks and copyright
Verify rights to product photography, copy, brand names and designs. Buying stock does not authorize copying protected content.
Imports
Check customs classification, duties, country-of-origin marking and any applicable product certifications.
CPSC Business Education ↗ · FDA Industry ↗ · USPTO Trademarks ↗
Consumer Protection, Privacy and Store Policies
Make the purchase decision understandable. Show total pricing, accurate product descriptions, estimated shipping dates, return conditions and clear subscription renewal terms where relevant.
- Use truthful endorsements and disclose material influencer/affiliate connections.
- Have a documented plan for shipping delays, cancellation and refund remedies. Review the FTC Mail, Internet, or Telephone Order Merchandise Rule.
- Publish a clear privacy notice reflecting actual data collection, sharing and retention practices.
- Use a trusted payment provider, limited staff permissions, MFA and a documented response to unauthorized access.
- Review federal and state consumer-privacy rules and payment-card requirements applicable to your size and activities.
- Do not collect sensitive data you do not need for the transaction.
FTC Internet order and shipping guidance ↗ · FTC Advertising and Marketing ↗
Fulfillment, Shipping, Returns and Inventory
Customers judge the promise you make at checkout. Document what happens between purchase and confirmed delivery.
Inventory
Track quantities, reorder points, damaged stock and supplier lead times.
Delivery
Select shipping services using parcel dimensions, zone, tracking and realistic transit expectations.
Returns
Explain who pays return shipping, product condition rules and how refunds are handled.
Quality control
Inspect orders, packaging, labeling and recipient details to reduce rework and chargebacks.
For international orders, identify customs paperwork, duties/taxes, product restrictions and who is importer of record before offering shipping destinations.
Startup Costs and Working Capital
Separate startup purchases, recurring expenses and costs that increase with every order.
Up-front
Formation, product samples, photography, website setup, initial inventory, packaging and legal review.
Recurring
Platform subscription, apps, bookkeeping, support tools, cyber/liability insurance, storage and marketing.
Per order
Product landed cost, shipping, packaging, payment fees, fulfillment charges, refunds and advertising acquisition cost.
Cash reserves
Prepare for supplier deposits, seasonal sales, delayed payouts, inventory replacement and chargebacks.
E-Commerce Product Profit Calculator
Estimate the selling price needed to meet a target contribution margin after product, order and percentage-based selling expenses. This is an educational planning tool; it does not calculate sales taxes or establish market prices.
Launch, Measure and Improve
- Before launch: test checkout, taxation settings, shipping charges, accessibility, confirmations and returns.
- Weekly: reconcile orders and payouts, track stockouts, customer service issues and acquisition costs.
- Monthly: review product profitability, cancellations, refund rates, chargebacks, inventory turns and cash available.
- Quarterly: verify permits, product rules, privacy disclosures, contracts, vendor performance and state nexus developments.
Use actual financial records to improve pricing rather than relying on gross margin alone.
Printable 15-Step Startup Checklist
Check the steps as you complete them. Progress remains in this browser session and is not submitted to PBEF.
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Official Resources and Next Steps
SBA Launch Guide
State and local agencies
Consumer protection
Product safety
Federal taxation
More business education
This guide is general education and not legal, tax, customs, financial or regulatory advice. Requirements vary by product, jurisdiction, operations and time. Verify them with the authority responsible for your business.