Retail: E-Commerce, Catalog, and Bricks and Mortar

Laws and regulations are lagging behind new forms of technology. Legislators and courts are being called on to adapt existing rules from nondigital sources—such as copyright laws or trade secrets—to the new uses that creative business minds have come up with. At the heart of new e-commerce directives are concepts aimed at the e-merchant’s still-thriving predecessor, the catalog retailer.

What do I need to know about sales tax and the Internet?

As a shopper, one of the advantages of online buying is that sales tax is hardly ever part of the final price. As an online merchant, what is your obligation to collect sales tax?

Each state sets its own sales tax policy and rates, and these differ across the United States Like the pre-Internet mail-order catalogers, the merchant collects sales tax only for states where it has a physical presence, like a warehouse or office. (There are five states that do not impose a sales tax.)

In theory, if sales tax is not collected by the seller, consumers are supposed to voluntarily pay what is called a “use tax” to the state where they live. This is not largely practiced, but states do pursue purchasers of big ticket items like boats or cars.

This situation has made at least two influential groups extremely unhappy. States are losing a large amount of revenue and are lobbying the national government for the right to tax Internet purchases. And traditional storefront merchants believe the Internet retailers have an unfair pricing edge, since consumers know that they will pay less for many products if there is no tax included.

The stakes in this battle are huge. And the states and traditional retailers will not give up. Until it is changed, the rule concerning sales tax remains whether there is a physical presence in a state.

If I have a storefront retail outlet, do I have to collect sales tax for every single sale that I make?

Every state has its own rules, but there some types of transactions that may be exempted. Certain items that are essential to subsistence, such as food or prescription drugs, might be exempted. Nonprofits and charitable groups are often exempted from paying sales tax. Also, federal law prohibits states from taxing the government or agencies.

Sales made for resale are usually exempt. It is up to the seller to provide proof for this.

If I have a Web site and I want to include a URL link to another site, is there any legal reason why I should not?

The World Wide Web is an infinitely complex network of links to other sites and pages within sites. So you would think that there should be no problem including a link, which is really just giving directions to another part of the Web. By and large, that is the case.

There may be exceptions, however, and courts are undecided on the issues. If, for instance, your link takes people to a part of a site that the site owners do not want the general public to see, you may be contributing to copyright infringement.

Which is it? E-mail marketing or spam?

There is just too much spam. Not only are potentially productive hours wasted in deleting spam, but it slows down legitimate Internet traffic.

The CAN-SPAM Act of 2003 is the most potent weapon so far. It imposes penalties for spammers who use fraudulent or deceptive subject lines, do not have a working “unsubscribe system” or do not include a legitimate mailing address in the message. Sexually oriented emails must be clearly marked.

The Act applies to virtually any U.S. business that uses e-mail. If you want to use e-mail to market your products and services, the best strategy is to encourage potential buyers to “opt in” using a Web site or snail mail to sign up for sales information or a newsletter.

If I sell through a mail-order catalog, am I liable for including deceptive claims made by the manufacturer?

A merchant may be held responsible if he or she repeats untrue claims in his or her catalog or over the Web. It is fair to ask manufacturers for proof to back up promises or guarantees that might be overblown. In any kind of ad copy or product description, claims should be supported.

Will a disclaimer keep me out of trouble?

A disclaimer might not be enough to counter a claim that is false or deceptive. Any disclaimer must be understandable and easy to see and read.