7 Regulations All Online Business Owners Should Know
Whether you’re selling jewelry, clothing, accessories, home décor, or even food, e-commerce, and online sales have become the method of choice for many small business owners.
However, there are special legal considerations online businesses need to follow. If you’re considering starting an online business, here are seven regulations you should look out for.
1) You’ll Need a Business License
Even if you are only selling online, you still need to register your business with the local authorities and get a business license. We have a guide to business licenses available here. Each state and city have their own regulations, but getting a license for your business is a fairly simple process in most places.
2) You May Need to Collect Sales Tax
Sales tax rules for online businesses are confusing because sales tax regulations vary so broadly from state to state. Generally speaking, you will need to collect sales tax from customers located in any state where you have a physical presence or “nexus” in legal terminology. That could be a physical store, but it could also be a home you work from or a storage unit where you keep inventory, or even where you have an employee working.
That means if you operate a business out of your home in San Francisco and ship to a customer in Los Angeles, you’d need to collect California sales tax. However, if you ship to a customer in New York, you would not have to collect sales tax. You should speak with a tax expert to make sure you are following all local regulations, but you can also learn more about sales tax regulations for online businesses with a guide from Etsy here.
3) You’ll Need to Double-Check Trademarks Before Naming Your Business
Most business owners don’t choose to trademark their business name right away, but you still need to respect existing trademarks. If a business name is already in existence and has been trademarked, you can’t use it. To check if a name is trademarked, you can search the United States Patent and Trademark Office database to determine if the name has been taken.
4) You’ll Need A Refund and Return Policy
Federal and local laws require that online retailers of any kind have a clearly stated refund and return policy. You are not necessarily required to accept returns, exchanges, or refunds, but you do need to state your policy clearly. Check the exact laws for return and refund policies in your state to make sure you are complying.
5) You’ll Need to Comply with Shipping Restrictions
For the safety of customers and venders, there are certain items that cannot be shipped domestically in the U.S. or internationally. You will need to adhere to shipping restrictions for your small business.
The U.S. post office has a full list of prohibited and restricted items here. Prohibited items cannot be shipped at all, while restricted items can be shipped but require extra precautions. Restricted items include nail polish, medicine, alcohol, and perfume, and prohibited items include gasoline and marijuana.
6) You’ll Need to Check Inventory Rules in Your Area
If you are selling products from an online shop, your inventory will have to go somewhere until it’s bought, and for many small business owners, that place is their home. However, some states have rules about “hoarding” or “warehousing'' certain items in your home. You should check the local regulations near you to be sure that you can legally keep your inventory in your house or storage unit.
7) You’ll Need to Comply with Privacy Regulations
Your online store must have a clearly-stated privacy policy if you are collecting any information about your customers and saving that data, including their shipping address for future orders, their email address, their name, their date of birth, or their credit card information.
Many point of sale software tools like Square and Shopify collect this information. You can learn more about developing a privacy policy and what it should include here.
Conclusion: Follow Online Business Regulations Carefully
Running an online business is rewarding and exciting, especially now; e-commerce has exploded in popularity in recent years and has been much more successful than other business types in the pandemic. If you’re thinking about diving into online business, however, you will need to be careful that you’re following all the legal guidelines for your state and federal laws as well.
We recommend checking in with a legal expert or tax expert near you to be sure you have all the information you need, but we also post business and financial information here on the Skip Blog; you can download our app to get push notifications with the latest news.