5 California Laws Every E-Commerce Owner Needs to Know

With a population of nearly 40 million people—far and away the largest in the U.S.—California is a key market for many e-commerce businesses. Aside from the traditional e-commerce challenges such as sales, marketing, customer service and fulfillment, California laws add additional legal complexities.

The Golden State is, in fact, one of the most heavily regulated states in the country for those selling products or services online. Brands and business owners need to be aware of these five California laws of e-commerce in particular.

California Business and Professions Code, Section 17538

Enacted in 1971, Section 17538 of the California Business and Professions Code places many responsibilities on internet-based businesses selling to consumers in California. Section 17538(d), for example, states that an online business must provide clear on-screen or in-writing disclosures of the business’ legal name, address, contact information, refund policies and return policies. These must all be provided before the transaction occurs. If the disclosures are made on screen, there are additional requirements for when, where and how the information is displayed.

The penalties for violating any of the provisions in Section 17538 are serious, as Section 17538(g) states that any violation is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, by a fine not exceeding one thousand dollars ($1,000), or by both imprisonment and fine.

California Online Privacy Protection Act (CalOPPA)

When the California Online Privacy Protection Act (CalOPPA) went into effect in 2004, California became the first state to require online businesses to include a privacy policy on their websites.

The law applies to any business collecting personal data from California consumers, requiring a privacy policy to explain the type of information collected, how users can request changes to data collected, whether the data is collected by third parties, how users will be notified of changes to the policy and many other details. The bill was amended in 2013 to require additional disclosures on the handling of “Do Not Track” requests.

California’s Amazon Law

California is one of many states with an internet sales tax law requiring large e-commerce operations to collect sales tax—contrary to federal law—even if the business does not have a physical presence (such as an office or warehouse) in the state. This type of law is commonly referred to as an “Amazon tax” or “Amazon law,” named after the online giant. California’s Amazon Law went into effect in 2012 and was both preceded and followed by a quarrel with Amazon, leaving thousands of California vendors terminated from their affiliations with the retailer.

At the time, Amazon laws were quite controversial. Today, they are more the norm, as Amazon collects sales tax nationwide. California laws state that an out-of-state retailer must collect sales tax from California customers if:

  • The retailer has an agreement with a person or persons located in California to pay for customer referrals obtained via a link on the California seller’s website (a click-through arrangement)
  • The retailer’s total cumulative sales to purchasers in California exceed $10,000 during the preceding 12 months, and
  • The retailer also has total cumulative sales to purchasers in California exceeding $1 million.

California Senate Bill No. 313

One of the newer developments in California laws is SB-313, a July 1, 2018 update to the California Auto-Renewal Law (ARL) that essentially makes it easier for consumers to cancel a subscription or membership.

Online businesses must now clearly display the terms of an auto-renewal and obtain consent for step-up pricing (meaning a subscription that later increases in cost). They must also accept online cancellations. Historically, the cancellation process was made difficult by sellers requiring a cancellation in the form of a phone call or mailed letter.

California Consumer Privacy Act of 2018 (AB375)

For decades, California has shown a clear commitment to protecting online shoppers. The latest legislation, the California Consumer Privacy Act of 2018, is being described as “groundbreaking,” “unprecedented” and “the toughest in the U.S.” The new law allows consumers to not only ask sellers what personal data is being collected, but also request that the data be deleted, be informed of any third parties with access to the data, and request third parties, too, to delete the data. Consumers can also sue if their data is not protected properly and, as a result, is accessed by hackers. These are only the basics of the bill, which is 31 pages long and poised to dramatically change the e-commerce landscape.

Conclusion on California Laws

Between California’s constant activity in e-commerce lawmaking, the complexities of the laws discussed in this article and the many niche-focused laws that affect different types of e-commerce businesses, San Diego business attorneys like Gehres Law Group, P.C. are heavily relied upon by e-commerce business owners. Don’t try to navigate the nuances yourself; build a relationship with a business attorney you can trust to ensure complete compliance at all times.

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