What Are the Dangers of Internet Business?

by Katherine Johnson, studioD

Internet sales have increased in popularity over the last few years, enticing both new and veteran retailers to enter the field. In 2011, Internet sales accounted for 4.7% of total retail sales, increasing to 5.2% of total retail sales in 2012. While Internet sales open your business up to new markets and promote growth, online retailing can also be dangerous if you are not up-to-date with current laws and regulations for your industry.

Privacy Policy

Creating a privacy policy for your website lets your customers know what information is being collected, how the information is being used and if you intend to sell the information. If your company is involved in a regulated industry like healthcare, banking, utilities or transportation you may be required to have a privacy policy on your website in order to prevent fines or the suspension of your business license. If you are not in a regulated industry, you are not required to have a privacy policy and don't have to expose your company to the risk of legal action.

Credit Card Fraud

Any Internet business selling products or services on a website may accidentally expose customers to the potential of having personally identifying information or payment information transmitted to hackers. This situation can be prevented by obtaining an SSL certificate to secure and encrypt customer transactions taking place on your website. SSL certificates are often sold with warranties that guarantee a certain amount of money to your customer if customer information is accidentally stolen by hackers resulting in identity theft. If your business doesn't obtain identifying information or payment information over the Internet, you will not need to secure an SSL certificate because you are not transmitting private information over the Internet. Even an SSL certificate will not protect your business if a customer is using a stolen credit card when making a purchase. You can verify that the shipping and billing address is the same at the time of purchase, require a phone number and require the card security code any time an order is placed. If you only receive a small number of orders, you can also call the customer after the order is placed to verify that the customer actually placed the order.

Sales Tax

When operating a business online, you may be responsible for collecting sales tax in multiple states. According to the Small Business Administration, you are responsible for collecting sales tax in any state that you have a store, office or warehouse. Using shopping cart software that automates checkout to include sales tax based on the location of your customer simplifies this process and prevents confusion for customers when checking out on your website. You can also hire an accountant for your business to ensure that all sales tax payments are sent to the appropriate state.


The FTC requires that any advertisements are truthful and don't attempt to deceive potential customers. Any advertisements making a claim about a product must be able to provide evidence-based results to support the claim being made about the product. If these advertising regulations are violated, your company may receive a cease and desist letter to stop your advertising campaign. You may also receive a large fine depending on the nature of your violation or you may need to edit your advertising materials to work within FTC regulations.


Chargebacks are refunds that are initiated by credit card companies when the customer doesn't feel that he has received the product or service he paid for originally from a business. You will have an opportunity to offer evidence refuting the customer's claim. If a customer claims he did not receive a package, but you have a receipt with a tracking number that shows the package was signed for then you can show the evidence to the credit card company to prevent a chargeback from occurring. If you are unable to show sufficient evidence, the credit card company will debit the transaction from your merchant account and you will likely lose the product you shipped as well.

About the Author

Katherine Johnson has been writing for over 10 years. She served as the CEO of two companies in the technology and beauty industries. Her writing can be found on AOL Travel, Screen Junkies and other websites. Johnson holds a Bachelor of Science in computer science.

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