Online marketplaces and e-commerce platforms make it simple to sell products online, but e-commerce includes more than just receiving payments and uploading product images. You have obligations under laws and rules, and breaking even one of them might have major legal and financial repercussions for you and your internet business. What you must know and why is being broken down.
Here are the six most crucial internet business laws that all owners of e-commerce businesses should be aware of.
1. Collection of sales taxes
The two certainties in life are death and taxes. The latter becomes more problematic for internet retailers when it comes to sales tax.
In the past, you would gather sales tax at the location of your company’s physical presence. No matter if you have a physical presence in the state or not, states can now impose sales taxes. States have the authority to decide what is taxed and when.
Lewis advised business owners to consider state sales tax on a state-by-state basis to avoid costly errors. Sales tax might not be required in one state unless a business makes more than a specific quantity of sales, but it might be required in another state even for a single, small-dollar transaction.
It’s quite laborious. The 50 states should go to a flat tax, the government should simplify it, said Mike Nunez, the founder of Tilde Enterprises. You can be subject to county, local, and possibly state taxes. There are three different tax levels to figure out.
The good news is that the greatest POS systems, top e-commerce platforms, and highly regarded tax software all eliminate guesswork from sales tax calculation. Since ignorance is not a defense, online retailers need to benefit from these initiatives. Associate Justice (Ret.) Anthony Kennedy stated there is software available to help small businesses handle the challenges of collecting sales tax when the Supreme Court issued its decision in a pertinent case in 2018.
2. Data privacy and security
It is crucial to safeguard client data and take cybersecurity seriously for your company. All it takes is one data breach or hack to completely ruin a small firm. In 2021, there were 715 data breaches among small organizations, according to Verizon’s Data Breach Investigations Report.
E-commerce businesses need to safeguard the privacy and security of their customer’s sensitive data since they collect and store a lot of it, including credit card numbers, personal information, bank account numbers, and Social Security numbers. Although there is no federal privacy law in the United States like the General Data Protection Regulation (GDPR) in Europe, certain states have passed their privacy laws, including California, Maine, and Nevada.
California approved a privacy law in 2020 that calls on firms to disclose the data they’re gathering. Customers will be given the option to either opt-out totally or limit the sharing of their data. Businesses that gather data from at least 100,000 customers are subject to California legislation. Additionally, it applies to businesses that generate more than $25 million in yearly revenue or generate more than half of their earnings from the sale of customer data. The law becomes fully operational on January 1, 2023.
Additionally, Virginia established a data privacy law that applies to companies that handle the data of more than 100,000 customers. It also has an impact on businesses whose sales of consumer data account for at least half of their total revenue. The law will provide customers the option to opt out of all data collection, rectification, and deletion. Also taking effect on January 1st, 2023, is this statute. Recently, laws with the same or comparable requirements were approved in Utah and Colorado.
You must follow best practices for data security. The Federal Trade Commission’s “privacy by design” suggestions, which include the following, is one way to achieve this. Products and services should be created with privacy and security in mind.
Companies should only gather the information they require for business operations, then destroy it after the sale is complete. E-commerce websites should have enough security in place to safeguard customer information. To secure the privacy of clients, data management staff, processes, and controls should be put in place.
3. GDPR
The aforementioned GDPR is a regulation that all companies that collect data from customers located in the European Union must abide by. Before utilizing these customers’ data, businesses must get their explicit consent by the GDPR. Businesses must also follow certain security guidelines for data storage and be open and honest about data collecting. You’ll notice as you browse the web that many websites have pop-ups about GDPR compliance. If you conduct business in the EU, your website may also need them.
4. Unlawful marketing
There are many options for businesses to promote their goods online thanks to the internet, but some guidelines must be observed. No matter how little, online retailers must abide by federal laws when selling their goods online. For instance, companies must disclose paid endorsements and are prohibited from making deceptive claims about their goods and services.
A common strategy for reaching both current and future customers is email marketing. The CAN-SPAM Act must be followed by business owners (and their workers) when creating email campaigns. According to a law passed in 2009 by the Federal Trade Commission, business owners might face fines of up to $46,517 for each separate email infringement. Online retailers could face penalties under the CAN-SPAM Act for the following reasons:
* The subject line of the email is misleading.
* The email’s headers are inaccurate or deceptive.
* The fact that the email is an advertisement is not made clear in the message.
* The company withholds its location from email recipients.
* The email does not provide instructions on how recipients can choose not to receive more communications.
* Within 10 business days, the company does not honor opt-out requests.
The company neglects to keep an eye on the performance of the email marketing provider it contracted. The corporation whose product is touted in the message and the company that sends the message might both be held legally liable, according to the FTC.
Additionally, online retailers are not allowed to violate patents or trademarks. It’s just too simple for a small business owner to look for product photographs, download them, and use them on their website, but if those images are now protected by copyright or trademark, you’re breaking the law, according to Nunez. “Celebrity likenesses and the use of other people’s trademarks or copyright are prohibited. To avoid that, you have to be careful.
Nunez also advised businesses selling goods aimed at children to be careful not to infringe on the Children’s Online Privacy Protection Act.
5. PCI adherence
The Payment Card Industry Data Security Standard (PCI DSS), introduced by credit card issuers Visa, MasterCard, Discover, and American Express in the early 2000s, is intended to safeguard consumer payment information. When storing, processing, and transmitting credit card information, an online merchant who accepts credit cards must adhere to PCI compliance. Steep fines are one of the consequences of noncompliance, and your merchant account arrangement may be canceled. Fortunately, the top credit card processors typically include PCI security safeguards as part of their services.
6. Norms and regulations
Terms and conditions are guidelines for an online store’s e-commerce website that are enforceable in court. They clarify your company’s regulations for things like refunds and shipping, and they could lessen your legal liability if you have a dispute with a consumer. The pricing and payment terms, as well as your business’s shipping, exchange, return, and order cancellation policies, should all be included in the terms and conditions. Additionally, they ought to describe how a dispute is resolved. In the terms and conditions, you should also specify your jurisdiction and liability restrictions.
In conclusion, You may expand your audience and increase your earnings by making sales through your online store. However, there are fundamental rules and laws you must go by while entering the internet world to avoid paying hefty fines. You can manage a secure, prosperous internet business by taking the time to become familiar with these rules.
