Like every area of business these days, e-commerce is surrounded by a maze of red tape, rules and regulations. In fact, selling online tends to be worse because of the international dimension. And any slip-ups you make are there for the world to see – so it’s doubly important to be legal and decent. These 12 tips try to pull together some of the areas that you need to think about and understand. They shouldn’t be taken as definitive – it’s your responsibility to comply with the law – but they are a good place to start.
1. Get your VAT Registration Right
You must be VAT registered if your annual sales exceed the current VAT threshold, which changes every year (look on the Customs and Excise website to get the most up-to-date figure). If you’re not VAT registered, you don’t have to worry about charging VAT and it would actually be against the law to do so.
2. Understand Tax on Shipping
People often don’t understand the finer points of VAT. For instance, if your products are a mixture of VATable and non-VATable, then the VAT charged on shipping should be in proportion to the mixture of VATable and non-VATable goods. Make sure your e-commerce solution can handle all of the tax rules.
3. Exempt EU Business Buyers
If your customer is a non-UK business in the EU and is registered for VAT in its own country, it is allowed to quote its VAT registration number to you in order to be exempted from tax. If you can’t accommodate this, those customers are likely to look elsewhere.
4. Charge the Right Country VAT Rate
Not many people know this, but if your online store is wildly successful and you are starting to turn over serious bucks selling into other EU countries, you hit some additional regulations. If you exceeded the individual VAT threshold for Germany, France, etc. then you should charge VAT at the appropriate VAT rate when selling into that country, not the usual UK rate.
5. Remember your Jurisdiction
We’re in the EU so we are bound by EU rules. It’s not the same when handling US buyers. US states might want to charge tax on sales into their area, but it’s their responsibility to levy this tax. You don’t have to charge this “use tax” which is between the buyer and the state where they live. So as a UK business you can sell into the US tax-free.
6. Make Orders an “Offer to Buy”
Your terms and conditions should make orders from customers an “offer to buy”. This way, if you have made a pricing mistake, are concerned about some aspect of the customer or have stock or delivery issues, you can reject the order. Otherwise, if you took payment with the order you have contracted to supply the goods by default.
7. Comply with EU Distance Selling Directive
Under the EU Distance Selling Directive, you must make clear who you are by providing full contact details, including an address and phone number. This is also good practice for building trust.
8. Offer a 7-Day Returns Option
Also under the EU Distance Selling Directive, you must accept goods for return within 7 working days. Provided you make this clear in your terms and conditions, your customers are responsible for the cost of returning the goods. However, you must refund the full cost of the products you sold along with the charge made for delivery. You are not entitled to charge a “restocking fee”. There are a few exceptions to this right, for instance in the case of goods made-to-order, but the unconditional right applies to the vast majority of purchases made over the internet or by telephone.
9. Allow for Disabled Visitors
Make sure that you comply with the disability law, which came into effect in late 2004. The key requirement is that you have to take “reasonable” steps to provide access to people with disabilities, and this includes your online store. One way of doing that is to make sure that all images have alternate (‘Alt’) text tags so visually impaired people are still able to navigate your site.
10. Privacy Matters
You probably need to register with the Data Protection Registry. Registering takes just a few hours of careful work and thought.
11. Comply with E-mailing Rules
You are only allowed to send direct e-mail marketing to individuals who have agreed to receive it from you by directly opting in. It is not sufficient simply to provide an opt-out. However, if you obtained their details in the course of making a sale the rules are different. You are allowed to continue communicating with them until they tell you otherwise, provided there is a free method of opting out each time you send them an e-mail. You can use e-mail for the opt-out.
12. Turn these Responsibilities into Benefits
Assuming that you are legal and decent, let the world know. Anything that adds to your credibility will help online. So why not list all of the things that you have done under the heading “We comply with the following legal and tax regulations?”