As the 21st century progresses, consumers are transitioning to the Internet as a means of accessing goods and businesses. The benefits of marketing your business online are numerous and include: targeting consumers outside your local area, marketing your products in a very accessible manner for potential customers and staying on par with competitors who offer products similar to your own.
If you decide to market online, you must be aware of a number of legal issues. If a business owner violates of any of the following, the Federal Trade Commission (FTC) may evaluate his or her case and take action.
According to the Internet Tax Freedom Act of 1998, there are restrictions on the sales tax applied on products sold online. As an example, take a business originally established in California but which also has a physical office in Nevada. If a customer who also resides in California buys this business’ product, California’s sales tax policy applies to the purchase. If the buyer is a Nevadan, then Nevada’s sales tax policy applies to the purchase because the business has a physical location in Nevada. Thus, if a customer purchases a good from a business that has an office in the same state, then a sales tax will apply to the purchase. However, if the business does not have a physical office in the same state as that of a customer’s residence, then the business does not collect a tax on that customer’s purchase. Note, under a 1992 U.S. Supreme Court ruling, retailers don’t have to collect sales taxes in states where they lack a physical presence. However, state and local governments have been pushing Congress to overturn that decision and require all online retailers to charge sales taxes in all states. Several bills have been proposed in Congress; the most recent one was introduced Nov. 9, 2011 by a bipartisan group of 10 senators.
Those who support overturning the Supreme Court ruling argue that the status quo gives online retailers an unfair advantage over brick-and-mortar retailers, and especially over small businesses. Opponents of such a law argue the opposite: that a tax on online commerce will hurt small businesses the most.
The internet allows for tremendously easy access to information and intellectual property. However, with this growth of access also comes the risk of copyright infringement. Realize that if you violate another person’s copyrights, the FTC can prosecute you. For this reason, pay extra attention to the method by which you refer to others’ material, as they can sue you if they have reason to believe that you have copied their work.
According to the “Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003,” there are strict regulation on how a business can market its products over email. This law allows marketers to send unsolicited e-mails to potential customers if the email meets the following conditions:
- There are clear procedures from unsubscribing from the email, and the company honors requests to unsubscribe within 10 business days
- The content presented in the emails is accurately described in the text and subject lines, and adult content is clearly labeled
- The recipients’ email addresses were not harvested from other spam groups or found through open relay (in which anyone on the internet can send email through it)
If your business is advertising in a fashion violating the following conditions, you have violated FTC regulations and could face serious fines. Rectify your marketing techniques to avoid any conflict with the government.
As a business operator, you are responsible for protecting any sensitive information customers provide you. The FTC maintains that companies must practice reasonable measures in protecting clients’ information. First, this means adhering to the policy you advertise to customers. Informing clients that you do not send any information to third parties, and then doing so is wrong. Second, this means disposing of sensitive information carefully to avoid third parties from finding it. Furthermore, one issue to bear in mind is hacking. Due to today’s technology, hackers can slip through internet security and steal information. Use secure servers to protect not only your information but also others’.
The key point in this article is this: Be honest about your products and business. Do not use faulty means such as spamming harvested email addresses or tricking people through false messages about your products. Not only will these tactics deter potential clients from your business, but they could also lead to serious consequences from the Federal Trade Commission. Instead, focus on marketing your business in unique ways. Set up a Facebook page to attract customers. Collaborate with local business to advertise each other’s work. In order to succeed, you must be willing to try unique means of reaching clients.
Expanding your small business to the internet may be the right choice for you. The benefits of doing so include increasing profits, advertising your product, and remaining competitive in your field. If you decide to work on the web, be aware of the laws applicable to your business.
This article was previously published on the Korb Law Group Business & Real Estate Law Blog
RICHARD E. KORB is a seasoned attorney with 30 years of experience in business law, and other related legal experience. Over his legal career, Richard has successfully litigated, negotiated and resolved over 300 cases for individuals and companies of all shapes and sizes. Richard leverages his big firm experience to now assist individuals and smaller companies with a broad spectrum of legal matters. In addition to his legal practice, Richard is also court-approved mediator and serves on the Alternative Dispute Resolution (ADR) panel for both the Alameda and Contra Costs County Superior Courts. The content in this article and on the website or blog where it is posted is for informational purposes only. It is not intended to serve as legal advice and no attorney-client relationship shall exist by virtue of its dissemination ©2011 RICHARD E. KORB. Should you wish legal advice, you may contact Richard for a consultation at 510-524-0903. ©Richard Korb. 2011.
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