Category : Financial and Statistics
Archive   : SBADV934.ZIP
Filename : F100.SBE

@082 CHAP ZZ

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³ MAIL ORDER SALES: FTC REGULATIONS ³
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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
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³ MAIL ORDER SALES: SALES & USE TAX ³
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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).

However, in recent 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 substan-
tial amounts of direct mail/catalog solicitations into the
state to register as retailers subject to sales or use tax
in the state, and treating such direct sales as taxable.

Some states have aggressively enforced these new laws,
which has imposed a major burden on many mail order firms,
and the states have been lobbying Congress to enact federal
legislation that would give states more power to force out-
of-state retailers to collect use taxes on sales made to
residents of a given state.

ÚÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ¿
³BOTTOM LINE: Don't assume that interstate sales are³
³still "sales tax-free," at least in many states. If³
³proposed federal legislation passes, you will prob-³
³ably be required to collect and pay over sales or³
³use tax in all states fairly soon after any such³
³federal law is enacted--if that should ever happen.³
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RECENT TAX DEVELOPMENTS:
------------------------

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....