7 Top eCommerce Laws You Must Know

by Rachel Scava | Sep 30, 2020 | eCommerce Accounting

There has never been a better time to run an eCommerce business, but it is important to stay up to date on eCommerce Laws. The world is now more connected than ever and numerous SaaS eCommerce platforms such as Bigcommerce, Shopify, Magento, and WooCommerce have made it incredibly easy for retailers to transition from brick and mortar stores to online shops virtually overnight during the pandemic.

Behind the scenes, the eCommerce industry has some complex legal issues. Every country has its own set of rules and laws to regulate the eCommerce industry, and it’s critical to know and understand the ones that apply to you.

Apart from taking into account all the eCommerce laws, you should know that they are subject to change, especially in a rapidly evolving sector like eCommerce. To protect yourself and reap all the rewards from your eCommerce business, you must stay informed of any changes and updates in the regulations as well.

Having a digital expert in the back office, running your eCommerce financial operation,s, and advising you on industry changes in things like taxes and law is what we specialize in here at Fully Accountable.

Let our digital finance experts who specialize in done-for-you eCommerce accounting take all of the guesswork out of running your back office, financial planning, and complex eCommerce taxes by doing the work for you! Schedule a call, or request a proposal now.

Let’s take a look at the top eCommerce laws you must know:

1. Licensing and Permits

This might seem obvious, but you wouldn’t believe how many people successfully launch an eCommerce, and sell a ton of products, only to end up in real legal trouble, and lots of money lost and time wasted.

Before you start selling a new product online, be sure to find out whether you need a license to sell it. Whether or not you need a license or permit will depend on where you’re located.

In the US, for example, you’ll probably need a state-sponsored license if you plan to sell healthcare supplements, medical devices, or other sensitive products in a highly regulated industry. Selling such items without possessing a license can lead to fines and other legal problems. So, take the time to study these requirements with your local licensing department.

For other products or services such as apparel, digital information, hand-made products, etc., you don’t need a special business license. For such items, the licensing required is no different from that for a brick-and-mortar business.

Many of our successful eCommerce clients also consult with Legal Zoom, a tremendous resource that helps you gain the actual licensing as we notify you of red-tapes.

2. PCI Compliance

The PCI Securities Council was founded by several financial institutions including Visa and Mastercard to develop and implement security standards for the protection of customers’ financial data. PCI compliance ensures protection for online buyers and sellers. It’s not merely about offering an encrypted checkout process, but you’d also need to avoid capturing any purchase information in any form.

Since eCommerce businesses are prime targets for data breaches and theft, PCI compliance is a must for online sellers. All SaaS eCommerce platforms are thus PCI compliant. To learn more about PCI compliance, take a look at this guide.

3. Patents, Copyrights, and Trademarks

Among the top eCommerce, laws include the concepts of patents, copyrights, and trademarks. While these are must-know regulations, the terms are often confused with each other. To avoid any unwanted legal issues, you’ll need to have a clear understanding of each. Here is how the United States Patent and Trademark Office defines each of them:

Patent: A property right associated with an invention issued by the United States Patent and Trademark Office for a temporary period in return for public disclosure of the invention.

Copyrights: provides protection to works of authorship including writings, artwork, and music that are tangibly expressed.

Trademark: The identifying symbol, design, word, and/or phrase that distinguishes the source of goods of one business entity from those of others.

If you feel you should be entitled to any of these based on what you’re going to sell online, you’ll need to apply for it. More importantly, make sure that by selling a particular product or service, you will not infringe on other patents, copyright, or trademarks.

4. Payment Gateways

One of the most critical functions for eCommerce transactions is the payment gateway. As the last step in any online purchase, they help complete online transactions. Without them, you won’t be able to sell a single product or make a single dollar in revenue.

Numerous payment gateways are available for eCommerce, each of which has its own set of regulations. Many of them have restrictions on certain types of products or services you wish to sell. Therefore, it’s important to check out the rules and features when exploring the different options for your online business.

Some of the aspects to consider when choosing a payment gateway include:

  • any restrictions or limitations around specific products;
  • Whether they’re hosted or non-hosted;
  • Whether they have anti-fraud features;
  • The setup, monthly, transactional, or termination fees they charge

Each SaaS eCommerce platform has its own set of vendors for payment gateway, which is why your choice of the platform plays a vital role here. Choose the platform that connects with multiple payment gateways so both you and your customers have a lot of flexibility when it comes to payments.

PayPal is most popular among shoppers around the world so make sure you have that option. Other commonly used payment options include Square, 2Checkout, QuickBooks Online, Stripe, First Data, and SecureNet.

5. Terms and Conditions

When someone makes an online purchase with your business, they enter into a contract. You must disclose the terms and conditions for the contract on your website that will cover your exclusions of liability, shipping and refunds, payments, the jurisdiction and law your business operates under, and a lot more. It often also includes clauses for the protection of the merchant in the selling process.

Terms and conditions serve as a solid shield against fraud. If you’re looking to grow and sell to a large online audience, you’ll likely face fraudulent attempts. These might include using someone else’s credit card information to make a purchase, claiming that you shipped a damaged product when the product was actually damaged by the customer after delivery, or other similar acts.

However, because taking legal action against fraudulent claims can be too expensive and time-consuming, many online retailers choose to take the hit and move on. Hence, the best approach is to stay alert to potential threats. In the case of payments, one great strategy is to verify payments through text messaging or email with the person before the money is transferred.

Since privacy, shipping, and refunds critical concerns for online shoppers, policies for these deserve to be disclosed under separate headings.

Privacy Policy

Privacy policy makes a significant component in terms and conditions that helps customers understand their privacy choices when visiting your online store, using your mobile app, or any other service.

The US Department of Commerce has set forth certain Privacy Shield Principles to regulate the collection, use, and retention of personal information during eCommerce before and during eCommerce transactions. Some of these include the Swiss-US Privacy Shield Framework and EU-US Privacy Shield Framework for customer information transferred from Switzerland, the European Union, and the UK to the US.

Shipping Policy

The shipping policy shapes customers’ expectations regarding the delivery of products. It should include the way in which you ship the products to customers and the expected delivery time, among other information.

If you plan to issue any promotions associated with the shipment, such as ‘make a $75 purchase to avail free shipping’, you should include that in your shipping policy as well. Including a shipping policy in the terms and conditions and on product pages reduces the chances of customers getting upset. While it’s not possible to keep everyone happy, setting expectations most certainly helps in building a loyal customer base.

Refunds Policy

No matter how awesome your products are, as an eCommerce seller, you’ll need to deal with returns and refunds from time to time. Having a relaxed refund policy helps build massive trust among customers. Keep in mind that dissatisfied customers speak louder than happy ones, so make sure you don’t ignore this part.

Addressing refund requests quickly and with courtesy shows that you care for your customers, who will then be more willing to make a repeat purchase. This means refund requests are an incredible opportunity to build brand evangelists.

Yet, it’s important to keep a check as too many refunds can wreak havoc on your bottom line. If a large of customers are requesting the same reason, you should immediately identify and resolve the root cause. A few actions to minimizing the number of refunds include adding accurate product descriptions, using high-resolution product images, dispatching orders as quickly as possible, ensuring intact packaging, and communicating shipping times before purchase.

Also, you have all the rights to charge the return shipping charge to the customer as well as set requirements for returns. For example, a product being returned for not serving the intended purpose must be in the right merchantable condition.

Before you launch your eCommerce store, make sure you create these policies. You’ll find a plethora of terms and condition generators on the internet, but they won’t account for your individual circumstances. So, it’s best to seek legal help to ensure full compliance.

6. Taxes

Not surprisingly, taxation makes our list of the top eCommerce laws. When it comes to taxes, the standards and laws are different for every country and state. To understand the requirements, you’ll need to your research. Just to give you an idea, shoppers in the US are accustomed to seeing prices exclusive of tax. That’s not the case with Australian customers, who are used to seeing all-inclusive product prices. You should take this into account when you expand to different countries and create a different website version for each market.

Since different states can have different laws, taxation is more complex than you think. If you’re based in the US, you’ll need to carefully understand the regulations in your state of origin. For example, apparel is a taxed item if you’re selling from New York. Likewise, a recycling fee of $0.11 applies to all items sold in plastic bottles in California State. On the other hand, all non-essential items in Britain are subject to VAT.

The easiest way to ensure full compliance is to get in touch with our digital finance experts at Fully Accountable. We can share important insights about your tax situation, what policies apply to your location, and what you need to do to file the taxes. You’ll also find out whether you qualify for resale certificates or sales tax exemption. Because tax laws are subject to constant changes, it makes perfect sense to outsource your accounting function that will take care of your tax obligations, giving you financial peace of mind.

7. Shipping Limitations

Just as certain payment gateways do not process transactions for specific products or services, shipping providers do not deliver certain ‘restricted’ items. Before listing products on your eCommerce site, make sure you’re totally aware of the shipping restrictions.

Items that are typically restricted by shipping providers include aerosols, alcoholic beverages, animals, dry ice, fresh vegetables and fruits, nail polish, perishables, airbags, ammunition, cigarettes, explosives, hazardous materials, perfumes, and poison.

While these items are usually subject to restrictions, not all shippers restrict the same items, which means you do have options. Plus, some shipping providers may agree to deliver any of these items but require extra fees and paperwork. Take this into account when evaluating the different shipping providers.

Besides, when you go global and start fulfilling international orders, you’ll not only need to comply with the taxation laws of the destination countries but also pay the relevant duties and customs fees. Study these tips issued by the Federal Trade Commission on selling internationally.

Final Word

Before launching your eCommerce business, it’s important to familiarize yourself with all the implications that come with it and all of the eCommerce laws. One crucial aspect is meeting the legal requirements of conduction a business online. The top eCommerce laws explained above should help you ensure compliance and protect yourself and your business from frauds, data breaches, etc.

In case your individual case is complex, consider outsourcing your eCommerce accounting. Fully Accountable can help you understand and comply with all tax laws that apply to your location. It will provide you with the technology and suggestions necessary for growth.

For immediate assistance, schedule a 30-minute strategy call with our eCommerce accounting experts.

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Rachel Scava is the COO of Fully Accountable - a back office solution for outsourced accounting and finance services. Fully Accountable provides full back office services for eCommerce and digital based companies that are looking to grow and scale. Rachel has dedicated her career to helping entrepreneurs and owners reach their highest potential through human ROI. Having discovered that one of the most challenging things for any business is building a high performing team, Rachel has developed processes and procedures to help companies build, train and measure team members that become major assets to the organization. Rachel believes in the theory of Super Employee’s where you can turn any ordinary team member into an extraordinary one. Her passion is people and yours can be too!


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