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What are online business laws?

Online business laws are similar to brick-and-mortar business regulations, but with their own special considerations that must be accounted for. These include the need to comply with strict regulations when it comes to copyright, security, privacy and sales tax.

Privacy and security are paramount

Online business owners need to make sure they prioritize both security and customer privacy. Since most ecommerce businesses collect and retain sensitive consumer information, they are responsible for keeping it out of reach from cybercriminals. The government emphasizes information security because not only is it good for business, it also helps companies avoid legal problems.

Ecommerce businesses can collect the following pieces of customer information:

  • Credit card numbers

  • Personal contact information

  • Social security numbers

  • Account numbers

Depending on the amount and type of information an ecommerce business owner is collecting and who they're gathering it from, companies may be subject to federal and state privacy laws.

While the protection of personal information is highly important, so too is the need to not infringe on any other text, movies, images or any other form of artistic creation. The aforementioned are all protected under the Digital Millennium Copyright Act of 1998, which stipulates:

  • "Webcasters" pay licensing fees to record companies

  • Devices used to illegally copy software cannot be manufactured, distributed or sold

  • Internet service providers are subject to copyright infringement for transmitting data over the Web

    • Service providers are expected to remove material that's violated these rules upon notice

  • Criminal penalties for evading anti-piracy measures built into commercially manufactured software

International sales

Ecommerce businesses may plan to start with a small operation that only sells regionally. However, as the business meets its goals and grows, it's likely that customers may come from around the country - and even past its borders. If a company sells a popular or niche product, they'll likely have to cater to a wider client base.

If an online business owner has to ship products overseas, he or she must first understand the taxes, customs laws, duties and even consumer protection issues that are involved with global commerce. Depending on the country and the shipping service provider, these characteristics could change. However, once the method of transportation and destination are finalized, ecommerce business owners can consult the shipper and see what they must to do comply with international regulations.

Online sales tax

Similar to how shipping regulations and guidelines are variable based on the final destination, sales tax on items sold also varies, as does state tax.

For instance, if an ecommerce business has any type of presence in the state - such as a store, warehouse or any other point along the supply chain - it must collect sales and state tax from its customers. If a business is selling its products and services to a customer in a state where the company has no tangible footprint, it is not required to collect the appropriate sales tax for that location.

Not every state has sales tax, including:

  • Alaska

  • Delaware

  • Hawaii

  • Montana

  • New Hampshire

  • Oregon

A majority of states also have tax exemptions on certain items, like food and clothing. While navigating each state's sales tax can be challenging, ecommerce business owners need not worry. Ecommerce platforms that provide integrated shopping cart software can handle these transactions since they're pre-programmed to calculate sales tax rates for the business owners.

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