You are a business, an online one. You are a standalone virtual online store or your online store may be linked to you physical business. Linking your online store to your business is a smart move as you have an existing customer base. If you’re a solo virtual, you need to create a customer base. Both forms of online stores require a smart e-commerce strategy. Online stores need be aware of the legal requirements of the legal, payment, business incorporation, tax and marketing aspects of a virtual trading store. These aspects are key to ensuring a successful online legal trading presence.
Here is a list what online stores need to know: This list is not exhaustive and you need to consult your lawyer for more detailed advice.
1. Have you registered your business ? Where is your business incorporated? Is it a company, an incorporated or a sole proprietor? This decision is key as you need to be aware of the legal and tax ramifications and requirements of the choices you make. Your choice influences decisions on equity partners if applicable and applicable corporate documents.
2. Is your company registered for tax?
3. Enquire about Double Taxation Agreements (“DTA”) if your online business is registered abroad.
4. The big e-commerce Vat issue for foreign companies selling digital goods in South Africa is still to be decided. Do they or do they not register for VAT? SARS spokesperson Adrian Lackay advises that “you may want to refer to page 59 of the 2013 Budget Review in Chapter 4. The exploration of how the legislation and the operational policy will develop will determine how efficient and less burdensome this proposal will be. It’s still a work in progress.”
This means there is still uncertainty on whether a foreign trading entity will be required to register for VAT for digital purchases you make on the Internet. But note – “Vat is payable where goods and services are consumed” so this is likely to be the trend in South Africa in alignment with the current global trends.
5. Where applicable and especially in different geographical jurisdictions and for certain product offerings- you may need a business licence.
6. Have you opened your business bank account?
7. Is your online payment mechanism in operation: Credit Card ; Paypal/; Google Payments / Wallet are some of the outsourced options to accept payment through your online store. Note: security procedures are mandated by the ECTA (s43.1.16), which act applies to e- commerce transactions with consumers, meaning you and I and not with juristic entities. A juristic purchaser will likely transact with an online company only if the payment mechanism is secure.
8. You might want to choose a payment mechanism originating and based in a foreign country.
9. Be knowledgeable of foreign countries requirements for the export of capital via the Internet.
a. Be mindful that your consumers may be subject to their countries central bank rules and have to obtain approval for permissible online foreign currency purchases above certain thresholds.
b. In the same vein notification to consumers that they will need to comply with customs duties and requirements for importation of items purchased online is also recommended.
10. Make sure your domain is registered and if you need a trademark – give this consideration.
11. Get smart on product information and presentation of your products online – and choose to be accurate and professional in the content and layout. Make sure you are not engaging in unauthorised reproduction from the internet to display your online products. Here, the CPA and ECTA s43.1.8 require you to provide sufficient description to your consumer to enable your consumer to make an informed decision.
Some additional and necessary legal requirements:
1. Get your Terms of Service drafted or reviewed by a lawyer and add in the appropriate legal disclaimers. This is the legal agreement between you and your online customers and sets out the legal engagement. Your online sale is a contract of sale! ( Note the ECTA requires terms of agreement, for engagement with consumers s43. 4.11)
2. Have you thought of a Returns Policy? You will need to advise your online consumers what they can expect and how you intend to respond to returns/exchanges and refunds if any. I would caution against a No Returns / Final Sale policy as the CPA has its own set of requirements. In addition , the ECTA requires that you provide this information to your consumers (s43.1.14)
4. Website: make sure your website is in compliance with all applicable (legal) requirements. of the ECTA especially s43 which sets out mandatory information that need to be on your website ranging from legal status to address to pricing and description of product offering as well as manner of payment and delivery and other aspects.
This is a generic guide and different company incorporation and payment jurisdictions require will compliance with their own laws.
Published in Business Day, Business Law and Tax Review 12 August 2013