On-line Enterprise Legal guidelines –

  • Small business owners cannot afford to break online business laws that protect consumers. The fines run to thousands of dollars.
  • Collecting sales taxes is a big problem for online retailers. The rules vary by state, which makes administration cumbersome without the help of software.
  • Business owners need to be careful when marketing to new and existing customers. If marketing emails violate the provisions of the CAN-SPAM Act, you may be fined by the Federal Trade Commission.
  • This article is aimed at entrepreneurs who want to open an online shop or are just starting an e-commerce business.

E-commerce platforms and online marketplaces facilitate online sales. However, e-commerce is more than just uploading product images and accepting payments. There are laws and regulations that you must obey, and if you break any of these laws, you can face serious legal and financial consequences.

What are online business laws?

Ecommerce, or buying and selling products on the internet, has exploded in recent years as people all over the world become familiar and comfortable with this type of trading. This opportunity has not escaped the notice of business owners who are increasingly selling their goods online using e-commerce platforms and marketplaces.

Online purchases are regulated to protect customers and safeguards are in place to prevent consumers from engaging in misleading marketing practices and data breaches. These legal provisions are known as online business laws.

Although the laws of how your business does business online vary from state to state, there are also national laws and international regulations. The laws cover everything from taxes to data protection. Due to the constant technological advancement, the e-commerce laws are in the works.

Key to take away: Online business laws govern how a business owner does business on the Internet. These laws cover marketing, taxes, and safety and are constantly changing as technology advances.

5 types of online business laws to be aware of

There are some ecommerce business laws that all online business owners need to know. Here are the top five:

1. Collection of sales tax

Death and taxes are the two certainties of life. For online retailers, the latter becomes extremely complicated when collecting sales tax.

“The number one thing to think about is sales tax,” said Lisa Lewis, auditor and TurboTax blog editor. “You used to levy sales tax when your company is physically present. Now states are entitled to sales tax whether or not you are physically present in the state.” States can also set the rules of what to tax and when.

To avoid costly mistakes, Lewis said business owners need to review state sales tax from state to state. One state cannot expect sales tax unless the dealer exceeds a certain level of sales, while another state even expects it to be for a single sale in small dollars.

“It’s extremely cumbersome. We hope the government streamlines it and converts all 50 states to a flat tax,” said Mike Nunez, Incfile’s chief communications officer. “You may have state, city, and even regional taxes. There are three tiers of tax you need to calculate.”

The good news, however, is that software, POS systems, and ecommerce platforms take the guesswork out of calculating sales tax. It is important for online retailers to use the software as ignorance is not a defense. When the Supreme Court issued its ruling in June 2018, Associate Justice (ret.) Anthony Kennedy stated that software was available that small businesses can use to overcome the hurdles of collecting sales tax.

2. Data protection and data security

The protection of customers’ personal information and the security of your ecommerce website are of the utmost importance. One data breach or hack is enough to destroy a small business. According to a survey by the National Cyber ​​Security Alliance (NCSA), 10% of small businesses that have suffered a data breach have gone out of business.

Ecommerce companies require and store a lot of important customer information, including credit card numbers, personal contact information, bank account, and social security numbers, so they should protect the privacy and security of that information.

While the US doesn’t have a federal data protection rule like the General Data Protection Regulation in Europe, some states, including California, Maine, and Nevada, have passed laws. It is important that you follow best practices. One way to do this is to follow the FTC’s “Privacy by Design” recommendations, which include:

  • Data protection and security should be integrated into products and services from the start.
  • Companies should only collect and dispose of data that they need for business purposes after the transaction is complete.
  • Ecommerce websites should have adequate security in place to protect consumer data.
  • Data management personnel, procedures and controls should be implemented to protect customer privacy.

3. Marketing Infringement

The Internet offers companies numerous opportunities to market their products online. However, certain rules must be followed. No matter how small online retailers are, when they sell their products over the internet they are subject to federal regulations. Companies cannot misrepresent products and services and are required to disclose paid endorsements.

Email is a popular method of marketing to prospects and existing customers. Business owners (and their employees) need to ensure that their email marketing campaigns comply with the CAN-SPAM law.

The law was passed by the Federal Trade Commission in 2009 and stipulates that business owners can face fines of up to $ 43,280 for each individual email violation. According to the CAN-SPAM law, online retailers can be fined:

  • The email contains a misleading subject line.
  • The email contains incorrect or misleading headers.
  • Your email does not indicate that the message is an advertisement.
  • The company does not share its location with email recipients.
  • The email does not instruct recipients to opt out of receiving future emails.
  • Your company does not consider opt-out requests within 10 working days.
  • You cannot monitor the actions of an email marketing service that your company has discontinued. (According to the FTC, “both the company whose product is advertised in the message and the company that actually sends the message can be held legally responsible.”)

In addition, online retailers are not allowed to infringe any trademarks or patents. “It’s too easy for a small business owner to search for product images, download them, and use them on the website, but if they are copyrighted or trademarked, you are breaking the law,” said Nunez. “You can’t use celebrity likeness, you can’t use someone else’s trademarks or copyrights. You have to be really careful to avoid this.”

Also, Nunez added, if your company sells products that are targeted at children, you need to be careful not to violate the Children’s Online Privacy Act.

“You can’t promote children, you can’t try to get kids to buy something. You have to be careful targeting children,” said Nunez. [Looking for tips to help you market your business online? Check out our marketing guide.]

4. PCI compliance

The PCI DSS (Payment Card Industry Data Security Standard) was introduced in the early 2000s by the credit card manufacturers Visa, MasterCard, Discover and American Express and is intended to protect consumers’ payment data: An online retailer that accepts credit card payments must meet PCI standards Storing, processing and transferring credit card information. Penalties for violations include heavy fines, and your merchant account agreement can be terminated.

5. General Terms and Conditions

An online shop needs ground rules for its ecommerce website that are legally enforceable – this is where the terms and conditions come into play. They explain your policies for everything from your returns to shipping policies, and therefore can reduce your legal liability if there is a disagreement with a customer. The terms and conditions should include pricing, payment, and your company’s policies for shipping, exchanging, returning, and canceling orders. It should explain the process for resolving a dispute. (You should also list your jurisdiction and liability limitations in the terms and conditions.)

Key to take away: When selling online, your business needs to make sure that the correct amount of sales tax is charged for each state. Emails must comply with FTC regulations, including the CAN-SPAM Act and, where applicable, the Child Online Privacy Protection Act. They must be PCI compliant. and your website should have terms and conditions outlining multiple policies and processes, including the dispute resolution process, for your business.

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