Chapter 5 10 Online Business Laws You Need to Know for Internet Selling

Beatriz Estay / 6 min read

10 Online Business Laws You Need to Know for Internet Selling

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After you’ve evaluated your online store idea and have a plan for product sourcing, it’s highly recommended that you research any restrictions and regulations that may affect you when opening an ecommerce store.

Understanding these issues before you try to start selling online will help you plan wisely and save you time, energy, and money.

In this chapter, we’ll highlight some of the obstacles that may lie ahead for your business.

Many of these issues are just part of the cost of selling products on the internet, but some may come as a surprise.

Knowing about them ahead of time is the key to working through them.

1. Taxes.

First, know that every state and country has different expectations and standards when it comes to taxes.

That means you have to conduct some research and understand your target market.

For instance, if your store’s demographic is located in the U.S., you’ll likely want to display your prices exclusive of tax. However, if your target market is Australia, where shoppers are accustomed to seeing all-inclusive prices, you’ll want to include tax.

Other issues are related to what you are selling and where you are selling it from.

For instance:

  • If you are located in New York and want to sell clothing, know that clothing is taxed in your state.
  • In Britain, value-added tax (VAT) applies to all non-essential goods.
  • In California, items you sell in plastic bottles will carry a $0.11 recycling fee, on top of additional taxes.

To cover all your bases, talk to a tax professional or local tax authorities readily available to you.

These experts will be able to help you understand specific circumstances that may affect your product or business, give you insights on how you need to charge tax for your business’s location, and help you apply for necessities like a tax ID, as well as let you know if you qualify for sales tax exemption and resale certificates.

Keep in mind, too, that this information — and the regulations around it — are constantly changing.

This is just one of the many reasons why having a tax professional on hand or working with your local tax authority will be an important aspect of running a healthy business. Or, you can use an app to automate a majority of the process.

2. Payment gateways.

There are many payment gateways available for ecommerce businesses.

Don’t feel limited by the fact that many of them have restrictions on specific products or services you may want to sell.

When you’re vetting payment gateways, just be sure to ask if they have any limitations around certain products, as well as whether they are:

  • Hosted or non-hosted, 
  • Include anti-fraud features, or
  • Require transaction fees, termination fees, monthly fees, or setup fees.

BigCommerce connects with multiple payment gateways, so you have the freedom to choose the ones that are right for your business. Learn more about the most commonly used options:

3. Trademarks, patents, and copyrights.

There tends to be some common misconceptions about what these words actually mean, with must-know laws and regulations around each one. 

You’ll want to be sure to have a clear understanding of each to prevent any unwanted legal complications.

The United States Patent and Trademark Office defines them as the following:

  • Trademark: A word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others.
  • Patent: A limited duration property right relating to an invention, granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention.
  • Copyright: Protects works of authorship, such as writings, music, and works of art that have been tangibly expressed.

Depending on what product you plan to sell, you may or may not want to apply for one of these.

Doing so isn’t strictly necessary, but you should at least check to make sure you’re not infringing on other patents or trademarks with your products or business.

For instance, if you want to sell t-shirts with Star Wars characters on them, you’re going to run into trouble.

Simply make sure to research with the appropriate copyright, patent, and trademark organization. They’ll help you start off on the right foot.

4. Shipping restrictions.

Earlier we talked about how your product will impact shipping costs and options, but at this stage in your small business, it’s time to address shipping restrictions.

Spoiler alert: Not all shippers restrict the same items, so you should have options — just do a little research to see if there’s a provider that will take on your product.

Most shipping companies clearly note their restricted items. Typically, restrictions are placed on items like:

  • Aerosols
  • Air bags
  • Alcoholic beverages
  • Ammunition
  • Animals
  • Cigarettes
  • Dry ice
  • Explosives
  • Fresh fruits and vegetables
  • Hazardous materials
  • Nail polish
  • Perfumes
  • Perishables
  • Poison

Also note that some providers may allow you to ship usually restricted items but will require some extra paperwork and fees. You’ll want to take this into consideration as you evaluate providers.

For information on shipping internationally, check out the Federal Trade Commission’s Electronic Commerce: Selling Internationally guide, which will help answer questions about taxes, duties, and customs laws.

5. Inventory.

Maybe you’re thinking of storing the clothing for your online boutique in a spare closet or packing your handmade jewelry in too many storage boxes to count?

While your determination is alive and well, believe it or not, your business may be too large to legally run out of your home.

If you’ll be holding substantial inventory, you should also check your lease, deed, or zoning codes to see if there are any prohibitions on running a business like the one you’re contemplating out of your home. 

You may be surprised to learn that you could benefit from having a brick-and-mortar location or warehouse in the early stages of your business.

If you’re hesitant to open an offline location for your customers to shop and are unable to run your business out of your home, don’t fret — you have more options.

In fact, it may be time to reevaluate your product sourcing plan. Try leveraging a partnership with a shipping and fulfillment company that specializes in dropshipping or 3PLs.

Bonus? By using a dropshipping or 3PL service, you reduce shipping zones, or the distance packages travel, which will typically reduce the cost of shipping and time in transit. A win-win for both your business and your customers.

Having a clear and organized inventory management strategy in advance will help you create a scalable business plan for the future.

6. Age restrictions.

Anytime you launch a website, it’s absolutely required that it comply with the Children’s Online Privacy Protection Act (COPPA) — no exceptions.

This act includes quite a few regulations, but the one that will likely apply to your site is the inability to collect any personal information from a child under the age of 13.

If you’re planning on selling a product or service tailored specifically to a young audience, you’ll need to abide by COPPA regulations.

As far as age verification requirements for ecommerce stores selling age-restricted items, you should look into your country’s specific codes.

For instance, sites selling items like vapes or alcohol need to have age verification tools before checkout in order to be legally sold.

Every country is different as far as their demands on how to run a business, and things get especially tricky when it comes to age restrictions on products.

Do your research and stay on top of legislation to ensure your business is on the up-and-up.

7. Business insurance.

There are multiple types of insurance for small businesses, including general liability, product liability, professional liability, commercial liability, and home-based insurance.

Reach out to your local insurance provider to find out which type would be best for your business and location.

During your vetting process, it’s a good idea to at least take a look at product liability insurance. It’s intended for companies that manufacture, wholesale, distribute, and retail a product and may be liable for its safety.

This is especially important if you plan on selling products that are considered high-risk, like CBD.

Also look into professional liability insurance (also known as errors and omissions insurance), which protects your business against malpractice, error, and negligence.

8. Licenses and permits.

Depending on which product you decide to offer, you may need a license to sell it.

This varies based on the country in which you’re located, so contact your local licensing department.

Legal Zoom is a great resource that can not only help with licensing, but with other red-tape items in this section.

“If you’re selling special products to a regulated industry (e.g., medical devices or holistic health care supplements), you’ll need to check with your state to see if you need to be licensed to provide those kinds of products or service,” wrote Nina Kauman for Entrepreneur.

“But, generally, the sale of digital information, clothing, or handcrafted items (made in the USA) doesn’t require a special business license. Rather, the business licensing required for an online retail business is not substantially different than that of a storefront business.”

9. PCI compliance.

PCI compliance is a necessary protection for online sellers, and nearly all SaaS ecommerce platforms have it baked in to some degree.

Online businesses tend to be prime targets for data theft, which is why ecommerce providers take it so seriously — and why you should too.

Educating your business on PCI compliance is the first step to making sure you’re protected.

Being PCI compliant doesn’t just mean providing a secure, encrypted checkout experience — you’ll also need to avoid storing any purchasing information on paper or via recording (e.g., if someone were to give you their card number over the phone).

BigCommerce Has You Covered

BigCommerce takes care of the vast majority of your PCI compliance needs. Our Cardholder Data Environment is PCI DSS 3.1 Level 1 certified as both a Merchant and a Service Provider. This protects against credit card data breaches and eliminates the significant cost and hassle of compliance.

10. What you didn’t know you needed to know.

There are also individual platform requirements that you may need to be aware of before starting your business.

For instance, when you download Facebook Messenger (which you can now use to transfer payments!), you are agreeing to have Facebook listen to you and serve ads based on what you say.

No, you were not imagining ads popping up after having a conversation with your spouse in the kitchen earlier that night. But, it’s 2020 and this is our new reality.

Being transparent with your business and your customers will eliminate the chance of any upsetting legal conflicts or lost business. 

Trust is something that is earned with your customers, so take the initiative to be well informed and protect your brand by building an online store that meets all legal requirements. Better to be safe than sorry, right?

Understanding the implications of all these laws is essential for the health of your business — and the protection of consumers who become your customers.

Continue on to the next chapter to learn how to conduct market research to ensure that your product idea is not only feasible, but profitable, too.

Want more insights like this?

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Table of Contents

IntroHow to (Realistically) Start an Online Business That (Actually) Grows in 2020
Chapter 1 How to Craft The Perfect Product and Brand For The Online Market
Chapter 2 How to Evaluate Market Viability for Your Products
Chapter 3 How to Conduct Online Market Research
Chapter 4 How to Conduct a Competitive Analysis for Your Online Business
Chapter 5 10 Online Business Laws You Need to Know for Internet Selling
Chapter 6 How to Identify and Analyze Your Target Market in 2020
Chapter 7 How to Source and Manufacture Products for Your Online Business
Chapter 8 Choosing The Right Ecommerce Platform For Your Business
Chapter 9 59 Productivity Hacks for Online Small Business Owners
Chapter 9 How to Create, Setup, and Launch a Profitable Online Store (Seriously)
Chapter 10 Driving Traffic to Your Online Store
Chapter 11 Next Steps After The Sale: Your Guide to Small Business Shipping
Chapter 12 Measuring Success: Analytics
Chapter 13 Time To Grow: The 5 Things To Consider When Scaling Your Online Business
Chapter 14 17 Tips For Online Small Business Owners

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Beatriz Estay

Beatriz Estay

Beatriz is a Small Business Content Marketing Specialist at BigCommerce and the fashion and lifestyle influencer behind The Letter Bea, an Austin, Texas based blog. She holds a B.A. in Communication and Sociology/Anthropology from Lake Forest College and specializes in ecommerce, marketing and merchandising strategies, influencer and branding work, and social media. When she's not curating content, Beatriz loves to travel the world, share her journey with Type 1 Diabetes, and find Austin's most Instagram friendly spots.

View all posts by Beatriz Estay

10 comments on “10 Online Business Laws You Need to Know for Internet Selling

  1. Katey Ferenzi
  2. Katey Ferenzi
    Katey Ferenzi on

    Will,

    Hmm, let’s see here. Unfortunately, I have not encountered this personally. Although I know of clients who have run into this and I cannot put you in contact with them directly. So, I did some research for you and found a pretty good example! Although this isn’t a perfect fit to what you’re asking it is a good baseline as the other business may feel you’re trying to infringe or dilute the industry.

    Check out this example from NOLO.com. From here, I may snoop around NOLO.com as they always seem to have great advice and specific examples as well.

    Thanks so much and good luck!

  3. Will Steel on

    Katey,
    Thanks for the reply. I realize you don’t want to offer any comment, insight, or advice that would lead to a litigious situation for us later but had hoped you would have had some 1st hand knowledge or example you could have shared.

  4. Katey Ferenzi
    Katey Ferenzi on

    Will, thanks so much for reading and your question! I apologize for such a delay. I have been out of the country for the last week.

    Regarding any type of legal concern, my response will always be the same. I’d highly advise you speak with a lawyer to ensure everything is on the up-and-up. In this case, it looks like you’re going to want a trademark lawyer specifically. You will get the most up-to-date advice and guidance plus, you’ll make sure you’re business doesn’t make any costly mistakes.

    If all else fails, it never hurts to make friends. By this I mean that you can attempt to speak with the company directly and gain permission for what you’d like to do. In your particular situation, you could end up partnering up with said business and even get some cross-promotional campaigns together to help boost awareness around both of your businesses.

    Hope this helps! Happy selling and be well.

  5. Katey Ferenzi
    Katey Ferenzi on

    Manmay,

    Thanks for reading! Glad you enjoyed. Please feel free to toss out ideas for future posts. We want to be sure to cover topics that are truly helpful to you. Be well!

  6. Will Steel on

    Katey thanks for the article. I have a question re trademark names and their use in selecting a domain name to better define a market and specific offer. If I own Business 1 set up to promotes a specific product/service for a client who owns Business 2 and that business is established and authorized to operate within Business 3, an established recognizable chain with a trademarked name; can I use the name of the chain within the name of the domain we are setting up to promote more attention to our clients unique opportunities as they relate to Business 3 opportunities operating in that chain? i.e WidgetsWithinXYC.com (Widgets= a discriptive word refering to what my client is authorized to offer within the chain) and (XYC= name of the chain store). Hope this was not too confusing. Thanks

  7. Manmay Mehta on

    This is very insightful. Today customers want the fastest shipping, And the competition in eCommerce business has been increasing immensely day by day. Thanks for sharing…:-)

  8. Katey Ferenzi
    Katey Ferenzi on

    Hi Paul, thanks so much for reading and the the great question. Yes, according to EU cookie law, any EU-based website, regardless of where the site is hosted, will need to inform all website visitors of cookies. If you’re referring to the newer law that specifies data must be stored in the EU, there is an exception for US safe harbor data centers, which ours is.

    In short, you will need to notify visitors of cookies. Let me know if you have further questions or concerns. We’re always happy to help.

  9. paulburgess on

    Here’s a question…in Europe we have a stupid bloody dumb poxy EU law that says we must inform all visitors about cookies. Indeed, BC have a feature for this. But what is the story regarding our website being on US servers as they are with BC? Would this law be applicable?

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