7 Legal Considerations You Need to Know for E-Commerce

You’ve prepared for this moment for a long time. You’ve researched the market and target audience, have a product the people need, and just finished working with one of the best web design companies in the United States. You’re finally launching your e-commerce store to begin selling your products to the masses.

Before this becomes your reality, at Nardiello Law, we want to ensure that you know exactly what you’re getting into when venturing into E-Commerce sales. We recommend that you research any legal restrictions and regulations that may affect you directly when opening an e-commerce store. In this article, we list 7 legal considerations you need to know for e-commerce.

Terms and Conditions

Your terms and conditions should outline that buyers are entering into a contract when they purchase goods from your website. Outline the terms of delivery, shipping, refunds and payments, exclusions of liability, and terms of use for your website. Finally, specify the choice of law and jurisdiction of wherever you’re based – this will shift the case to your own legal system, so you don’t find yourself negotiating some unknown foreign law interpreting your terms in the event of legal issues.

Website terms and conditions

E-Commerce Shipping and Delivery

A clear, defined delivery policy is a must-have so that customers know when to expect their products and how their packages will be delivered. You will need to specify the expected delivery timeframes and costs and detailed terms on any shipping promotions. Some merchants use shipping discounts and promotions to encourage a higher average spend – for example, free shipping on orders over $150. These types of policies can help bring in extra revenue.

By making your shipping information clear on your product pages and within your terms and conditions, you can prevent any problems from arising with disgruntled customers. This means customers are more likely to understand the shipping terms you offer, with the security of their agreement to your terms should any disputes arise.

Refund Policy

Offering refunds are an important part of creating a trustworthy relationship with customers. Conversely, if you do not recognize that refunds are a normal part of the online sales process, you will hamper the business-client relationship. A refund policy should be more liberal than you might imagine. You must refund cancelled purchases within the statutory 14-day “cooling-off” period. You can ask the customer to pay the cost for returns, and you should expect items returned to be in a re-sellable condition.

Accepting that refunds are a natural part of the business and responding promptly in handling refund requests will help assure customers that you care while ensuring you don’t end up shy of consumer selling regulation.

Refund Policy Tip:

Include your refunds policy prominently on your website, and certainly within your terms and conditions so that buyers can see what they are getting into. By getting the customer to read agree to these terms and conditions before their purchase, you can be sure they understand and accept the terms of refunds beyond their statutory rights.

Ecommerce Data Protection

Consumer data protection is a hot button issue in the United States as well as throughout the world. Failure to advise visitors to your website and on an online store that you are in fact storing their information can land you in serious legal trouble. If you haven’t yet hired or worked with a data protection lawyer, we highly recommend you do so as soon as possible.

If you operate in the EU or the United Kingdom, you will need to be registered un the Data Protection Act. A business cannot migrate information collected from your customers or website visitors outside of the EU. You can only hold information relevant to your business’s needs. If a customer asks for their information to be removed from your records or revealed to them, you are required by law to do so.

In the United States, the Federal Trade Commission (FTC) is the primary agency regulating e-commerce activities. This includes regulations for many e-commerce related activities such as commercial email, online advertising, and consumer privacy. In addition to the FTC, site owners in the USA should become familiar with the Payment Card Industry (PCI) Security Standards Council. These organizations provide security standards and regulations for handling as well as storing your customers’ financial data.

Consumer Privacy

Online privacy is a big issue as many e-commerce sites collect and retain personal information about customers. Some of the personal data you will likely obtain would include a customer’s name, address, email address, and possibly their credit card and other types of financial information. As the e-commerce site owner, it is your responsibility to ensure this personally identifiable information is protected. When you collect such data, you comply with federal and state privacy laws.

E-commerce site owners should provide a privacy policy and post it on the website. This policy should clearly identify what kinds of personal information you will collect from users visiting your website, who you will share the information you collect with, and how you will use and store that information.

Most small business e-commerce site owners approach a privacy policy like any business requirement.  You could have a lawyer draft a privacy policy document for your business or secure a trusted service provider to manage and host your privacy policy. Once you have a privacy policy in place, be sure to remain in compliance with it — if not, your business can face costly legal fees.

Online Advertising Compliance

Like traditional advertising, there are strict laws and regulations regarding online advertising. The FTC regulations for advertising are designed to protect consumers and to prevent deceptive and unfair acts/practices. For many small business online e-commerce sites, the main form of advertising is email marketing. For this reason, E-commerce business owners need to understand the CAN-Spam Act, which was enacted in 2003.

What is the CAN-Spam Act?

This act establishes requirements that a business must follow if they engage in email marketing. Violations of the CAN-SPAM act can lead to hefty penalties and fines; each email that is sent in violation of the act can result in penalties up to $16,000. Furthermore, any commercial email messages sent must include a notice that the message is an advertisement, include an opt-out button, and a physical postal address for your business.

Collecting Taxes from Online Sales

Have you ever noticed that some e-commerce websites charge you tax when you make an online purchase, while others don’t? The reason is that if a business has a physical presence in a state (e.g. a store or office), then it is required by law to collect state and local sales tax from customers in that state.  However, if the business doesn’t have a “physical presence,” then collecting tax on purchases is not required.

This dates back to a 1992 Supreme Court ruling that said states cannot require mail-order businesses, and by extension, online retailers, to collect sales tax unless they have a physical presence in the state.

For e-commerce site owners, the one thing you will have to research is how your state classifies a physical presence. In legal terms, this is called a “nexus,” and each state defines nexus differently.

Navigating sales tax laws can be difficult. To ensure you are in compliance with tax laws, it’s always best to contact your state’s revenue agency to ensure you have the correct information on taxation before starting your e-commerce venture.

Nardiello Law: Internet and E-Commerce Law Experts

Nardiello Law helps businesses and individuals with an e-commerce presence navigate the numerous laws concerning copyright, trademark, privacy, competition, and contracts on the internet. We help your business succeed by ensuring minimal disturbance when having to deal with potential legal disruptions. Contact us today to learn more about about our Internet and E-commerce Law services.