Monster Media 1993 #2/Image.iso/business/sba93_3a.zip/F100.SBE

Text File | 1993-07-01 | 6KB | 129 lines

@082 CHAP ZZ

             ┌─────────────────────────────────────┐
             │ MAIL ORDER SALES:   FTC REGULATIONS │
             └─────────────────────────────────────┘

Any business that is involved in selling goods by mail order
needs to be aware of a regulation of the Federal Trade Com-
mission that deals with mail order sales, called Rule 435.1.
@IF153xx]Since your business is engaged primarily in mail order sales,
@IF153xx]it is crucial that you understand the rules discussed below,
@IF153xx]to avoid possible customer complaints that could result in a
@IF153xx]run-in with the FTC for @NAME.

This federal regulation requires any business soliciting
mail order sales to be prepared to ship the merchandise within
30 days after an order is received, unless it has clearly
stated in its solicitation that orders will not be shipped
for a longer period, such as 60 days.  Otherwise the solici-
tation will be considered as an "unfair and deceptive trade
practice."

In addition, if you receive an order and for some reason
you cannot ship it within 30 days (or the period stated in
your solicitation), you must:

    . Immediately notify the customer and offer the
      customer the option to either cancel the order and
      receive a refund or consent to the delay in
      shipment;

    . Indicate when you will be able to ship or that you
      do not know when you will be able to ship the order;

    . Provide other required information to the customer,
      which will vary in content depending upon when you
      expect to be able to ship.

Rule 435.1 of the FTC is fairly complex and difficult to un-
derstand, but you need to understand and be familiar with
it if you sell goods by mail order.  If you are going into
the mail order business and want a single source of authori-
tative information on the mail order laws of the U.S. and
all 50 states, you should obtain the "Mail Order Legal Man-
ual," by Erwin J. Keup, Esq.  It is available from the pub-
lisher of this program, at the address given on the sign-
off screen.

@CODE: LS
In @STATE, mail fraud is protected by law.

@CODE:OF
             ┌─────────────────────────────────────┐
             │ MAIL ORDER SALES:   SALES & USE TAX │
             └─────────────────────────────────────┘

Note that if you sell across state lines to customers in
states where you have no offices, employees or other pres-
ence, the sale is usually not subject to sales tax in eith-
er state, since it is an interstate sale.  However, techni-
cally, such sales are subject to "use tax" (which is sort
of a "shadow" of the sales tax, which applies where the
sales tax doesn't in most states) in the customer's state.
The U.S. Supreme Court and other courts generally have not
supported attempts of the various states to force out-of-
state retailers to collect use tax on mail order or other
sales made to residents of the taxing state, so that most
mail order firms tend to treat such interstate sales as
being tax-free, or tell the customers that it is up to them
to report the purchase and pay the use tax (which they al-
most never do).

Unfortunately, in just the last 2 or 3 years, many states
have enacted new and broader sales and use tax laws that
require out-of-state retailers who advertise in the local
media or send substantial amounts of direct mail/catalog
solicitations into the state to register as retailers sub-
ject to sales or use tax in the state, and treating such
direct sales as taxable.  Some states are aggressively en-
forcing these new laws, which will definitely cramp the
style of many mail order firms if these laws stand up in
court.  Even if these new state laws are held to be uncon-
stitutional, a bill has been working its way through the
Congress in recent years that would specifically grant
states the right to require out-of-state sellers to collect
use tax on sales made into the state, with certain restric-
tions.  The bill as it currently stands would provide ex-
ceptions for small businesses, since having to file and pay
sales or use taxes to all 50 states would be extremely ex-
pensive and onerous for small firms, and would effectively
put many small mail order firms out of business if they are
not exempted.  (Note that the new state laws adopted in
recent years do not generally make an exception for small
firms that are sellers.)

      ┌───────────────────────────────────────────────────┐
      │BOTTOM LINE: Don't assume that interstate sales are│
      │still "sales tax-free," at least in many states. If│
      │proposed federal legislation passes, you will prob-│
      │ably be required  to collect and pay over  sales or│
      │use tax in all  states fairly soon  after any  such│
      │federal law is enacted--if that should ever happen.│
      └───────────────────────────────────────────────────┘

RECENT TAX DEVELOPMENTS:
------------------------

Recently, the U.S. Supreme Court held, on May 26, 1992, in
the case of QUILL CORP. v. NORTH DAKOTA, that a state may
NOT force out-of-state mail order retailers to collect use
tax on sales to residents of the state, where the company
had no presence in the state.  The Court held that such
state laws interfere with interstate commerce, in violation
of the U.S. Constitution.  Thus, it appears that many of
the broad new mail order use tax law provisions, which have
been adopted in some 34 states in recent years, and which
were targeted at mail order firms, may be invalid.

This is very good news for mail order retailers, but the
bad news is that the Court also indicated in its decision
that Congress could, if it chooses to do so, constitutional-
ly enact legislation that would permit the states to require
use tax collection on mail order and similar sales by out-
of-state retailers.  Thus you can probably expect Congress
to pass such a law in the near future, under intense lobby-
ing pressure from state governments that are also grasping
at any means possible to raise their tax revenues....