Online Business Laws You Need to Know (2023)

• Small business owners cannot afford to break online business laws designed to protect consumers - penalties run into thousands of dollars.
• Sales tax collection is a big problem for online retailers; The rules vary by state, so it's difficult to administer them without the help of software.
• Business owners should be careful when marketing to new and existing customers.
• This article is for business owners with an ecommerce store or online component in their business.

Ecommerce platforms and online marketplaces make it easy to sell online, but ecommerce involves more than just uploading product photos and accepting payments. There are laws and regulations that you must follow, and if you run afoul of any of them, you and your online business could face serious legal and financial consequences. We explain what you need to know and why.

What are the online business laws?

Ecommerce, the buying and selling of products over the internet, has exploded in recent years as people around the world have become more comfortable and comfortable with this way of buying. This opportunity has not been missed by entrepreneurs who are increasingly selling their products online using e-commerce platforms and marketplaces.

Online shopping is regulated to protect customers, with safeguards in place to protect consumers from misleading marketing practices and privacy breaches. These legal rules are known as online business laws. Although the laws about how your businessgo onlinevary from state to state, there are also national laws and international regulations. Laws cover everything from taxes to privacy. Also, e-commerce laws are constantly changing due to constant technological advances.

key to take:Online business laws regulate how a business owner can legally conduct business on the internet. These laws cover marketing, taxes, and security, and are constantly changing as e-commerce technology advances.

6 Types of Online Business Laws You Should Know

There are many online business laws that every ecommerce entrepreneur should know, but here are the top six.

1. Sales Tax Collection

Death and taxes are the two certainties of life. The latter becomes extremely complicated for online retailersvalue added tax.

"The first thing to think about is sales tax," says Lisa Lewis, chartered accountant and editor of the TurboTax blog. “In the past, you collected sales tax where your business had a physical presence. Now states are eligible for sales tax whether or not you have a physical presence in the state.” States also set the rules of what to tax and when.[Read ourTurboTax reviewto find out how tax software can help your business.]

To avoid costly mistakes, business owners should review sales taxes state by state, Lewis said. One state may not expect sales tax unless the retailer exceeds a certain sales amount, while another expects it even on a single small sale.

“It is extremely complex. Our hope is that the government will simplify it and get all 50 states to switch to a flat tax,” said Mike Nunez, founder of Tilde Enterprises. “You can have state, county, even county taxes. There are three tiers of tax that you need to calculate.”

The good news, however, is that highly rated tax software thatbest POS systemsand leading e-commerce platforms take the guesswork out of calculating sales tax. It is crucial for online traders to take advantage of these programs as ignorance is no defense. When the Supreme Court ruled on a relevant case in 2018, Associate Justice (Ret.) Anthony Kennedy noted that there is software to help small businesses overcome sales tax levying hurdles.

2. Data protection and data security

Protect customers' personal information and takeCyber ​​security for your businessseriously are of paramount importance. One data breach or hack is all it takes to destroy a small business. CorrespondingVerizonIn the Data Breach Investigations Report, there were 715 small business data breaches in 2021.

E-commerce businesses request and store a lot of important customer information, including credit card numbers, personal contact information, bank account numbers, and social security numbers, and they need to protect the privacy and security of that information. Although the US does not have a federal data protection regime like EuropeGeneral Data Protection Regulation (GDPR), some states including California, Maine and Nevada have passed their own laws.

In 2020, California has oneData Protection ActTo do this, companies must disclose the information they have collected. Consumers have the option to limit the sharing of their information or to opt out. California law applies to businesses that collect data from at least 100,000 consumers. It also applies to companies that make more than $25 million annually, or make more than 50% of their revenue from the sale of consumers' personal information. The law will come into force on January 1, 2023.

Virginia also passed a privacy law that applies to companies that process more than 100,000 pieces of consumer data. Businesses that generate at least half of their revenue from selling consumer data are also affected. The law will empower customers to correct and delete data or object to data collection altogether. This law will also come into force on January 1, 2023. Utah and Colorado recently passed legislation with the same or similar criteria.

It is important that you follow data security best practices. One way to do this is to follow the recommendations of the Federal Trade Commission."Privacy by design"Recommendations that include the following.

• Privacy and security must be built into products and services from the start.
• Businesses should only collect the data they need for business purposes and dispose of it after the transaction is complete.
• E-commerce websites must have adequate safeguards in place to protect consumer data.
• Data management personnel, procedures and controls must be implemented to protect customer privacy.

Did you know?:Cyber ​​security is one of themmost common ecommerce challengesfor small businesses.

3. GDPR

The above GDPR is a law that applies to all companies that collect data from consumers in the European Union. GDPR requires companies to get clear permission from these consumers before using their data. Organizations must also be transparent about data collection and adhere to certain security standards for storing data. As you surf the web, you will find that many websites have pop-ups related to GDPR compliance. Your website may also need them if you do business in the EU.

4. Marketing Breach

The Internet offers numerous opportunities for companies to market their products online, but certain rules must be followed. Online retailers, no matter how small, are subject to state regulations when selling their products over the Internet. For example, businesses must not make false claims about products and services and must disclose paid recommendations.

E-Mail-MarketingIt's a popular way to reach potential and existing customers. Business owners (and their employees) need to ensure their email campaigns comply with the CAN-SPAM law. The law, passed by the Federal Trade Commission in 2009, states that business owners can be fined up to $46,517 for each individual email violation. Under the CAN-SPAM Act, online merchants can be fined for:

• The email contains a misleading subject line.
• The email contains incorrect or misleading headers.
• The email does not indicate that the message is an advertisement.
• The company does not share your location with email recipients.
• The email does not instruct recipients on how to unsubscribe from future emails.
• The company does not accept deletion requests within 10 business days.
• The company stops monitoring the actions of a contracted email marketing service. (According to the FTC, "Both the company whose product is advertised in the message and the company that actually sends the message may be held legally liable.")

In addition, e-commerce merchants must not infringe any trademarks or patents. "It's very easy for a small business owner to look up product images, download them and use them on [their] website, but if that's copyrighted or trademarked now, you're breaking the law," Nunez said. “You may not use celebrity images [and] you may not use any other person's trademarks or copyrights. You have to be very careful to avoid that.”

Also, Nunez added, if your company sells products aimed at children, be careful not to violate the Children's Online Privacy Protection Act.

“You can't advertise to kids [and] you can't try to convince them to buy something. You have to be careful with the kids," Nunez said.[Looking for tips to help you legally market your business online? look at oursSmall Business Marketing Guide.]

5. PCI Compliance

Introduced in the early 2000s by credit card issuers Visa, MasterCard, Discover, and American Express, the Payment Card Industry Data Security Standard (PCI DSS) was designed to protect consumer payment data. An online retailer that accepts credit card payments must complyPCI compliancein the storage, processing and transmission of credit card data. Penalties for non-compliance include exorbitant fines and your merchant account agreement can be terminated. Luckily she isbest credit card processorsoften have PCI measures built into their services.

6. Terms and Conditions

An online store needs legally enforceable ground rules for its e-commerce site – this is where terms and conditions come in. They explain their policies on aspects of their business such as: B. Returns and shipping, and may reduce your legal liability if you encounter a disagreement with a customer. The terms and conditions should include pricing and payment terms, as well as your company's shipping, exchange, return, and cancellation policies. They should also explain the process for resolving a dispute. Also list your jurisdiction and limitations of liability in the Terms and Conditions.

Tipp:All businesses, not just ecommerce businesses, should make sure they don't break these rules.amazing economic laws.

Dealing with the legal side of your business

Selling through your ecommerce store can help you reach a wider audience and generate more sales. However, if you venture into the digital world, you must follow important laws and regulations to avoid expensive fines. Taking the time to familiarize yourself with these regulations can help you run a safe and successful online business.

Shanya Waltower contributed to the writing and reporting of this article. Source interviews were conducted for a previous version of this article.