Online businesses give the operator the freedom and flexibility to control the hours they want to work from the convenience of their own home. With Kiwis spending more than 4.7 billion a year online, there’s an opportunity for a healthy profit too. Your online store or service may only be a small-scale operation compared to the eCommerce giants, but the same trading laws apply.
Fair Trading Act (FTA) and Consumer Guarantees Act (CGA)
If you regularly offer to sell goods online, buy products with the intention of selling, or actively engage in online sales, you are considered a trader and must abide by the Fair Trading Act 1986 and Consumer Guarantees Act 1993. The seller’s obligations under the act applies equally to internet traders, bricks and mortar setups and temporary operations.
As to whether you are an online trader can be a grey area. For example, if you are decluttering the house and sell some old furniture on Trade Me you are not considered to be in trade as the items were once intended for personal use. If you however regularly buy furniture at garage sales with the intention of selling on Trade Me to make a profit, you are considered in trade and must comply with the acts, regardless whether any profit was made.
You are also considered to be in trade if you are GST registered, have staff to help with your sales or have incorporated a company.
All businesses that are considered to be in trade must declare their trade status to reassure the buyer that they are protected under the acts. Under the FTA, it is illegal to provide false information about your product or service, knowingly sell a faulty product, or mislead your customers.
The same intellectual property rules apply to your online business. For more information about intellectual property, check out our article. If you are operating in overseas markets, your intellectual property must be applicable to each country you are trading in.
An online business is not exempt from tax or ACC levies. If you are considered to be in trade, you must pay tax on all your earnings and declare the income if receive benefits. As well as income tax, if your business has annual online sales of over $60,000, you are also required to register for GST.
All businesses are legally obliged to keep accurate financial records for seven years, including all online businesses.
This article only touches the of the legalities, compliance and fair practice of trading online, and with all business pursuits, it is recommended that you receive legal advice. If you would like to talk to one of our friendly commercial lawyers, contact us today.