“Attention Online Retailers: 3 Critical Legal Concerns You Can’t Afford to Ignore”

Navigating the Legal Landscape: Key Legal Issues for E-commerce Companies

The growth of the ecommerce industry has been nothing short of phenomenal in recent years. In 2015 alone, the industry grew 14.6%, and it continued to see 16% year-over-year growth in the third quarter of 2016. Yet, with growth comes increased scrutiny from regulators, resulting in new laws that e-commerce companies must adhere to. This article outlines key legal issues that online retailers need to be aware of and take action on.

Online Sales Taxes

When Amazon first started selling products online, it didn’t have to pay sales tax because the law stipulated that only brick-and-mortar businesses needed to pay it. However, sales tax laws are now applied to online stores as well, and they can vary from state to state and country to country.

For instance, if you have a physical presence in a state, you may need to pay sales taxes regardless of where your customers are located. In California, you may also be required to pay sales taxes if you have a representative in the state, even if your main office is based elsewhere.

One solution is to establish a physical presence in one of the states that generate the bulk of your sales. This can help avoid the pains of double taxation that online retailers often face. But, it’s essential to ensure that those states have a reasonable tax rate.

Minimum Advertised Price

If you’re selling products from another company, you may have to follow restrictions on advertising that the manufacturer imposes. One such policy that many suppliers have is the minimum advertised price.

MAP is enacted for a number of reasons, including preventing merchants from engaging in price wars, which can put pressure on the manufacturer to lower their wholesale price. If you enter into an agreement with a supplier, you must follow this policy to the letter. Never advertise a price below what they will allow.

Dealing with Fraudulent Payments

Fraudulent payments are a serious concern for online merchants. Unlike brick-and-mortar businesses, online retailers must usually accept liability for any fraudulent payments. This is because the law states that, if a brick-and-mortar retailer uses a CHIP reader, then it’s not their responsibility to determine whether fraud took place. It’s up to the bank to monitor the account for fraudulent activity if the retailer took reasonable precautions.

When an online retailer accepts payment, the transaction is classified as “card not present.” Since the retailer isn’t able to confirm the identity of the buyer, they usually assume the liability. If it’s a fraudulent purchase, they will have to pay restitution to the cardholder.

However, this law is not absolute. It is usually based on the assumption that online retailers offer less security than the customers’ bank. But, if you can show that you have exceeded expectations with your online security, you may be able to shift the liability back to the bank.

Conclusion

E-commerce companies must now navigate a more tightly-regulated legal landscape. They must be aware of all the laws and take all reasonable precautions to abide by them. Navigating sales taxes is challenging for all businesses, and online retailers in particular must pay careful attention to tax laws. Also, be sure to read agreements with suppliers carefully to avoid violating MAP restrictions on advertising. Finally, protecting yourself and your customers from fraudulent payments should be a top priority.

Featured photo credit: Pexels / Negative Space via pexels.com.

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