Key eCommerce Regulations You Need to Follow
Want to start your own dropshipping business? Or a custom clothing store with print on demand business model? It might be a great idea, given the ever-growing size of the eCommerce industry. However, every online business should be in the know of the many rules and regulations that affect their operations.
Laws about corporations, intellectual property, and contracts all impact businesses operating online, no matter how big or small they may be. You should always be aware of the potential legal problems that might arise with your online store.
So, even if you've got a small side business of custom products or are an established brand, this article will brief you on standard eCommerce regulations.
Why compliance With eCommerce Regulations Matters?
Part of being a successful online store owner is knowing and following the laws that pertain to your online store. Protecting your business's reputation and assets in the online marketplace requires familiarity with applicable legal requirements.
Everyone who deals with your business is impacted by the compliance issue. If you don't follow the law, you risk losing your customers' trust and your suppliers' cooperation. Moreover, you can have trouble attracting and retaining star employees.
Complying with all laws and regulations that pertain to online business is not optional. If you mess up in this department, risks could include canceling your business license, class action lawsuits, government involvement, and even criminal prosecution in worst-case scenarios.
Standard eCommerce Regulations You Should Comply With
While many sectors are subject to similar rules and regulations, e-commerce has a unique handful. E-commerce stands apart from the crowd in a few key respects.
These include shipping constraints, consumer privacy, foreign payments, and protection. Let's consider some standard eCommerce regulations to be aware of.
GDPR and Other Privacy Laws
GDPR, or General Data Protection Regulation of the European Union, governs the handling of personal data and information inside the EU, including by non-EU enterprises doing business within the union. Since its enactment in 2018, GDPR has served as a model for similar data privacy regulations in several other countries, including some states in the US.
The General Data Protection Regulation (GDPR) imposes stringent rules on storing and transmitting sensitive information, such as credit card details. Although GDPR covers a lot of ground, its primary emphasis is on limiting the processing of personal data without a legitimate reason to do so.
This directly impacts online retailers operating in the European Union, and many aspects of the GDPR are comparable to the California Consumer Privacy Act (CCPA). To know more about the recent regulations of CCPA, read Navigating California's new Privacy Regulations: CCPA and CPRA explained.
For Shopify merchants, ensuring GDPR compliance can be a daunting task, especially with the complex nature of the regulation and its ever-evolving requirements. With the help of the Consentmo app, merchants can easily implement and maintain compliance, giving them peace of mind and allowing them to focus on running their businesses.
Cookie Policy
A privacy policy is essential for every e-commerce site, including information-gathering methods (cookies), uses, and retention periods. Customers are more likely to be wary of and draw the attention of local authorities, who check for adherence with customer data security regulations if they encounter an online store that does not have a privacy policy.
Online stores may use data from cookies to improve customers' shopping experiences. However, not all varieties of big e-commerce data can be used for analysis. Many countries' data privacy regulations prohibit using personally identifiable information (PII) for analytics. This information includes:
- complete names of customers
- Residences
- SSNs
- bank account and credit card information, etc.
It is standard practice to include this data in a cookie policy, and it is required by privacy legislation to disclose to people which cookies your business uses and utilizes. Similar technologies to cookies, such as flash cookies, web beacons, device fingerprinting, pixels, and plugins, are likewise subject to privacy laws.
If you're simply utilizing essential cookies, you're not legally obligated to disclose that fact. However, the Information Commissioner's Office (ICO) recommends that you do so; nonetheless, for visitors to your website to have a successful experience, it is required to set "essential" cookies.
Want to know more about data collection text? Read what Data Collection text is and why it is important for your store's compliance.
Business Licenses and Permits
You may need a commercial license to sell your items in your area. Generally speaking, if you run a storefront shop in the United States, you will need a seller's permit issued by your state's department of commerce.
Consider getting the following separately in special conditions:
- A reseller license separately allows you to buy products in wholesale quantities without paying any sales taxes in your area.
- Why? If you have a reseller's license, you may just have to collect sales tax from your consumers. You should do the same if you want to work with wholesalers and suppliers.
- Foreign vendors should inquire with a local licensing bureau to determine whether they are required to get any licenses.
COPPA
Websites cannot legally collect any information personally identifying users below the age of 13 without obtaining parental consent under the Children's Online Privacy Protection Act (COPPA) of 1998.
Specifically, COPPA specifies what information should be included in privacy rules, when businesses should seek parental approval, how children should be safeguarded online, and what kinds of products may and cannot be promoted to them. Because of the effort required for compliance, several online retailers refuse to sell anything intended for use by minors.
In connection with the compliance laws - the CPRA has a separate section regarding Children's Personal Information. The CPRA prohibits selling the personal information of a person under the age of 16. However, under the CPRA, violations involving children’s personal information are liable similarly to intentional violations, i.e., fines of $7500 per violation. This amendment has provided extra protection to children’s personal information in the CPRA.
PCI Compliance
The Payment Card Industry Data Security Standard (PCI DSS) is a set of mandatory security measures for businesses to follow when dealing with customers' credit card and debit card information.
These standardized industry practices guarantee that the safety of credit card information is prioritized in all credit card transactions, whether at a physical storefront, a website, or over the phone.
Having PCI compliance requires more than simply the transaction itself. The information must be secure, whether in transit or at rest. Although this is PCI DSS's ultimate goal, the standards and the technology they affect are constantly developing.
Sales Tax
Include the correct amount of sales tax, which varies by state in the United States. Penalties may be incurred for failure to remit sales taxes to the state where the product is sold.
Listed below is what the sales tax in Rhinebeck, New York covers:
Source: https://www.bigcommerce.com/blog/online-business-laws/
Selling on a global scale increases the difficulty considerably. There are customs, levies, and duties at international borders. Each jurisdiction has its tax requirements and regulations. You'll have to dig to figure out what's expected of you. Many online retailers outsource the task of determining delivery rates to a third party.
VAT
In addition to sales tax, your eCommerce store needs to ensure the payment of value-added tax (VAT). The VAT is a kind of indirect sales tax applied on purchases at every stage in the production and distribution of a thing or service.
The value-added tax the consumer pays is computed as a difference between the price of materials used in the product and the total product price.
The value-added tax is used in more than 160 nations. Mainly found in the European Union (EU) countries, you need to examine whether you run a global business and whether it owes taxes in VAT.
Shipping Restrictions
Shipping items purchased online may be confusing due to the wide variety of logistics providers and their accompanying shipping policies, guidelines, and pricing. Companies often list their prohibited products prominently on their websites. Here are some examples of goods that are often banned:
- Poison
- Perishables
- Perfumes
- Nail polish
- Hazardous materials
- Fresh fruits and vegetables
- Dry ice
- CBD products
- Cigarettes
- Explosives
- Aerosols
- Animals
- Airbags
- Ammunition
- Alcoholic beverages
You may be able to transport prohibited products with some service providers, but doing so may need more effort on your part and a higher charge. It's important to remember this when you compare different delivery options and software platforms.
Affiliate Programs
If you are considering using affiliate marketing for your business, remember that the Federal Trade Commission (FTC) enforces laws against misleading advertising.
The FTC has established transparency requirements that affiliate programs and other marketing agreements between businesses and media must follow. Publications often use this technique with articles that seem like editorial content but are real ads.
Conclusions
The success of your eCommerce store depends on your ability to comply with applicable laws and ensure the safety of the people who will eventually become your clients.
Having a compliant e-commerce platform is mandatory and not up for debate. Doing business in a method that doesn't violate laws is the right thing. While automating your efforts and simplifying compliance challenges may seem intimidating initially, some solutions in the market may help.
Get familiar with your sector's taxation, payment protection, copyrights, data gathering, use, and licensing necessities before launching an e-commerce firm. All of that can seem like a lot at first. But this information will protect your company from future legal disasters and expensive operational mistakes.
About the Author
Filip Nikoloski is a Partnership Specialist at Printify. Printify is a transparent print-on-demand and dropshipping platform designed to help online merchants make more money in a simple and easy way.
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