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10 Top Tips on Ecommerce Legislation and Taxation

Like every area of business these days, ecommerce 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 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 job to comply with the law – but they are a good place to start.

1) Comply with the 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.

2) Offer 7 day return option

Also under the EU Distance Selling Directive, you must accept goods for return within 7 working days. Why not make this a selling point?

3) Get your VAT registration right

You must be VAT registered if your annual sales exceed £60,000. 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.

4) 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 ecommerce solution can handle all of the VAT rules.

5) Exempt EU business buyers from tax

If your customer is a non-UK business in the EU and is registered for VAT in their own country, they are allowed to quote their 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.

6) Charge the country VAT rate if you exceed the country VAT threshold

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 exceed the individual VAT threshold for Germany, France, etc. then you should charge VAT at the appropriate country VAT rate when selling into that country, not the usual UK 17.5% rate.

7) 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.

8) Allow for disabled visitors – it's the law!

Make sure that you comply with the disability law that hit the statute book in 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 text tags so visually impaired people can still navigate your site.

9) Privacy matters

You probably need to register with the Data Protection Registry at www.dpr.gov.uk. Registering takes just a few hours of intense work and thought.

10) Comply with the rules on sending email

You are only allowed to send direct email 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 provided there is a free method of opting out each time you send them an email. This can be by email.

In conclusion - turn these burdens into a benefit.

Finally, 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"?

How to fall foul of the law

Stay anonymous

A great way to keep your customers in the dark is to make sure that at no point on your site do you reveal who you are, where you’re doing business and whether you’re a registered company. If you stick to these guidelines, you can be sure that no-one will ever trust you.

Spam to death

It’s surely obvious that everyone loves spam.  So make sure that you spam everyone who visits your site, don’t give any warnings and don’t ask for people’s permission. Being associated with spammers is the sure way to business heaven. Everyone knows that, don’t they?

Who needs a guarantee

You might have heard vaguely of the distance buying directive from the EU, but if you want to upset the authorities and your customers, just ignore it.  Once you’ve got their money, why would you want to hear from them again, let alone offer a no-quibble money-back guarantee?  Be smart, ignore their rights.

Chris Barling, CEO of ecommerce software specialist, Actinic, www.actinic.co.uk, 0845 129 4800

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