Running an e-commerce business can seem simpler than a brick-and-mortar enterprise for a variety of reasons. Overhead will often be much less, communication with customers can happen over the phone or by email and it can even be run from the comfort of your own home. However, an e-commerce company still must follow business laws and is subject to its own set of industry-specific regulations. Below we explore three types of laws that e-commerce businesses must know about.
Privacy Laws
Online privacy is a major concern, as most e-commerce retailers collect and store personally identifiable information about their customers on their servers. Privacy in the United States is controlled by the Federal Trade Commission. Under FTC rules, a website isn’t required to implement a privacy policy, but if they do have one they must comply with it or leave themselves open to lawsuits.
E-commerce sites should always have a privacy policy, as implementing one is a requirement under the California Online Privacy Protection Act (CalOPPA) for any website that is accessible to California residents. Any offending entity can leave themselves open to lawsuits and hefty fines, even if they’re not California residents.
Finance Laws
E-commerce businesses should be aware of how finance laws, such as state sales tax regulations, affect them. Before 2018, online businesses weren’t required to collect taxes for states outside of where they had a nexus, such as a warehouse or an office. However, all that changed last year with a Supreme Court ruling overturning the previous-held belief barring interstate taxation.
The South Dakota vs. Wayfair, Inc. ruling affects how states collect taxes on E-Commerce businesses. It allows states to collect sales taxes from businesses who make a significant number of sales to customers in that state, even if those businesses don’t have a nexus there. Even though this ruling only applied to South Dakota’s sales tax law, multiple states have followed this model, ensuring that in the following years, e-commerce businesses will have to collect sales taxes for almost every state to which they ship their products.
Copyright Laws
It is said that a picture is worth a thousand words, and this is even more evident online. E-commerce websites need alluring images to show off their products, advertise their services and use on their blogs. But where do these images all come from? Website owners may feel tempted to simply do Google searches for the images they need and then put them right on their site. This can land them in big trouble, however, as images, just like most content found online, are copyrighted and must be licensed for specific uses before they can be posted on a site.
While this list is far from exhaustive, it is a great starting point for e-commerce business owners to begin understanding their legal requirements and obligations. If you want your business to succeed it’s important to stay on the right side of the law.
Read more articles like this one today! Here are a couple to get your started:
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