Editor’s Note: Thanks to Priyanka Prakash of Fundera for this guest post on e-commerce website policies.

Just like any venture, your e-commerce business needs to outline its policies from the get-go. Because of the technology and processes involved, however, running an online store will require even more policies than your average business. 

When you’re in charge, you’re responsible for setting up all the necessary e-commerce policies for your online business. But what protocols do you need to establish yourself? 

Though the full answer to this question will depend on a variety of factors — like your industry, headquarters location, and your offerings — there are certain policies that every online retail business should consider setting up.

Let’s review the importance of e-commerce policies before diving into the details on the five most crucial e-commerce policies that you’ll need to set up for your online business.

Why you need set-in-stone e-commerce policies

Before we dive into the policies themselves, let’s establish why they matter in the first place. The laws, regulations, and licenses that apply specifically to e-commerce businesses make e-commerce policies all the more crucial. 

COPPA, or the Children’s Online Privacy Protection Act, for instance, gives parents control over what information websites can collect about their children. Meanwhile, ACPA, the Anticybersquatting Consumer Protection Act, protects certain domain names. Odds are, the state that you’re headquartered in will also have its own set of e-commerce regulations that you’ll need to keep in mind. You might need to access licenses and permits for your e-commerce business on the local level, as well. 

To be sure, the Federal Trade Commission works to prevent unfair, fraudulent, and deceptive business practices, including in the e-commerce sector. The FTC ensures that the internet remains a free-flowing and safe marketplace. Plus, GDPR, The General Data Protection Regulation, sets a global standard for how e-commerce businesses handle customers’ personal data. Nexus-based e-commerce tax laws make matters even more confusing about how and when to collect sales tax from customers. 

As an e-commerce business, you’re operating at the doubly-regulated meeting point of business and technology. So, you’ll need to create your e-commerce policies carefully and with all of the necessary laws in mind. 

Even if you run your business through an e-commerce platform like Shopify, that has basic e-commerce policies baked into its design, you’ll still need to create a few of your own policies. Be sure to know which policies your platform will take care of and which ones you need to establish yourself. 

5 e-commerce policies you to need to have

You’re now familiar with why airtight policies for your e-commerce business are even more crucial for you than they would be for a business that isn’t internet-based. As a reminder, the full list of policies you need to establish for your e-commerce business will depend on factors like your industry and the location of your headquarters. That said, there are a few fundamental policies that pretty much every new e-commerce business will need to set up before they get going:

1. Terms of Service

You need to iron out your e-commerce business’s Terms of Service as soon as your business opens its proverbial doors. Terms of Service — also known as Terms of Use, Terms and Conditions, or Disclaimers — describe the regulations that you attach to your e-commerce business. Visitors have to agree to these Terms of Service to use your site. 

Through your Terms of Service policy, you can do the following:

• list prohibited user actions on your website
• reserve the right to delete accounts if the user violates these terms
• preserve ownership of the content on your site

E-commerce businesses aren’t legally required to have Terms of Service policies, but it’s a good idea to create one nonetheless so that you can regulate user activity on your site. Having Terms of Service also lowers the likelihood of customer lawsuits against your business, as long as they are enforceable and fair under state and federal law.

2. Privacy policy

Unlike a Terms of Service policy, a privacy policy is required by law. Under the GDPR mentioned earlier, e-commerce businesses must have privacy policies that achieve the following ends:

• Obtain customer consent for data processing
• Anonymize data to protect customer privacy
• Guarantee notification in the event of a data breach
• Explain careful cross-border data transfers
• Provide a dedicated data protection officer (for some companies)

Though the GDPR is an EU regulation, it applies to all websites that market goods or services to EU residents. So, unless you can guarantee that your e-commerce business is inaccessible for EU residents, you’ll need to create a GDPR-compliant privacy policy.

The good news? Many sites provide online scripts to help you create a personalized and compliant privacy policy for your e-commerce business. 

3. Returns and exchanges policy

Will your e-commerce business offer returns or exchanges? You’ll need to iron out your returns policy before you ship out your first order. Your returns policy should answer the following questions:

• Do you offer returns?
• Do you offer exchanges?
• What’s the procedure for returns or exchanges?
• Is free shipping available for returns or exchanges?
• How will customers receive refunds for returns? 
• Is there a limited time frame for returns or exchanges?
• Are there any other conditions for returns or exchanges?

Again, many returns and exchanges policy templates are available online. However, because these policies are so unique to each individual business, make sure your final product fully reflects your actual practices surrounding returns and exchanges. 

4. Shipping policy

Through your e-commerce business’s shipping policy, you need to delineate the details of how you will ship your customers’ purchases. This policy should include the shipping company options, the shipping speed options, pricing, handling times, and shipping restrictions. The more detailed your shipping policy, the more in-the-know your customers are. As a result of this knowledge, shoppers will be more in-tune with the details that will help them make the best purchase for their preferences. 

5. Taxes

Finally, you need to stay on top of the confusing tax laws that apply to e-commerce businesses. You need to charge sales tax on a transaction if a state government decides you have a nexus with its state. 

“Having nexus” in a state basically means that you’re doing business there. The tricky part is that many states define this differently — it could depend on your physical presence in the state, the number of transactions you do within the state, whether you gain revenues from an affiliation with a business or person in the state, or whether you use cookies or software on devices within the state. If you do have nexus in any given state, then you’ll need to register for the state sales tax permit.  

All of this will be legally required, so you won’t have any say in how you organize your sales taxes. But you will be able to decide how much of this process you reveal to your customers. Most customers expect to see the amount of sales tax included in their transactions. 

However, providing a description of how this amount is calculated couldn’t hurt, either. Again, the more information you give your customers, the more knowledgeable and empowered they’ll be to make the right decisions. 

E-commerce policies: Next steps

There you have it: five key policies you need to draw up for your e-commerce business. Luckily, many e-commerce businesses have created these policies before you, so you have an internet full of examples to draw from as you create your own e-commerce policies. At the end of the day, though, you’ll need to ensure that your policies are unique to your own practices and your customers’ preferences. We suggest consulting with a business lawyer if you have any questions about the legality of your e-commerce policies.

About the Author

Priyanka Prakash is a senior staff writer at Fundera, specializing in small business finance, credit, law, and insurance. Priyanka’s work has been featured in Inc., Fast Company, CNBC, and other top publications.

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