Question

This being for an online apparel E-Commerce business

Describe ethical issues that could arise with your company conducting electronic commerce. Make sure to include those that could occur in your relationship with vendors or other partners as well as with your customers. What steps would you take to ensure that the ethical issues that you identified would not occur in your company?

Explore the taxes that are potentially levied on your company’s activities. For the purposes of this question, assume that you are based in a small warehouse in Michigan and sell online to customers in other states and other countries. Include how your Capstone e-business would be affected by income taxes, transaction taxes, property taxes, use taxes, tariffs, and value added taxes.

Answer 1

The ethical issues faced by my e-commerce company and steps that can be taken to avoid the ethical issues are detailed below:

• Online data theft and security- It is my prime responsibility to protect the customer data. An online e-commerce transaction requires the customer to provide information such as credit card numbers, e-mails and passwords which is common to other accounts, purchase history, personal information such as address, date of birth, etc. Hackers may steal this information and use them for their advantage. Thus, there is a high potential for misusing customer data. My e-commerce company should not violate any consumer protection laws.
• Product listing- The customers are carried away by the image and product details of the products online. It is my duty to ensure that my e-commerce company should display accurate product listing on the website. The products should be genuine and not only to attract the customers. Customers view the product online and their decisions are based on the product reviews. My e-commerce company should not display false information. The customers should not be guided by providing false pictures or videos.
• Online selling laws- Sometimes the situation might pose ethical dilemmas of not following the laws for profit maximization. I would ensure that my e-commerce company follows all the online selling laws and comply with the government regulations. For example, liquor should not be sold to individuals under 21 (Product specific regulations). Collecting appropriate sales tax is an ethical issue too.
• Vendors’ selection- When selecting vendors or suppliers or third party suppliers, it is the responsibility of the e-commerce company to check on its genuineness. For example, counterfeit products can be sold by third party agents who might be sitting in China or Singapore. However, the supplier who gets these products to sell on the e-commerce website might not be aware of these counterfeit products. Thus, the e-commerce company should sell authentic products only.

The taxes that are potentially levied on your company’s activities:

• Direct Tax (Income Tax)- An online e-commerce business is obliged to pay income tax as required by the government. Usually it is 30% profits from the business.
• Sales tax- Since the business has a physical warehouse in Michigan, the business needs to collect sales tax from its customers. However, the state of Michigan does not allow the city or any local units to impose sales tax.
• Use Tax- It is a companion tax for sales tax. Use tax is for purchases made by customers outside the state. A tax of 6% must be paid to the State of Michigan on all taxable items sold via the internet. Use tax of 6% on the total price includes shipping and handling charges.
• Value added tax- Michigan’s single business tax (SBT) is considered as a value added tax. SBT is considered as a consumption type of VAT which is the cost of doing business.
• Handling charges are considered as part of the gross proceeds hence they are subject to tax.