How can individual online stores continue? - Wulin Blog Network

With a notice from the Beijing Administration for Industry and Commerce, individual online shops known for their zero threshold will soon bid farewell to their days of "unlicensed operation," sparking a debate over whether it's a blessing or a curse.

The three most watched aspects of the personal online shop license system:

1. To engage in e-commerce within a residential building, one must obtain a certificate after the property owners' committee or residents' committee has gained the consent of relevant stakeholders, then register accordingly;

2. Enterprises or individual businesses that have already registered, if the scope of e-commerce exceeds their original business scope, need to process a change registration;

3. Individuals selling or exchanging personal items on the internet, and not for profit, do not need to register.

The Beijing model sparks debate

On March 6, 2008, the Beijing Administration for Industry and Commerce released a draft opinion soliciting public feedback on e-commerce supervision, detailing the specific applicable scope of online store licensing. After collecting social suggestions, the draft is expected to be officially released by the end of March and implemented within the year.

As early as December 1, 2007, the "Beijing Information Promotion Regulations" came into effect, with Beijing being the first to stipulate that online operations should legally obtain a business license, known as the Beijing model - the personal online shop license system. However, at the time, the regulations did not specifically define how to obtain a license or who specifically needed one.

This time, the Beijing Administration for Industry and Commerce clearly stated in the draft that all e-commerce operators for profit must register, obtain a business license, and then commence operations.

Lin Ya, Secretary-General of the Beijing E-Commerce Association, told our reporter that from the regulations, "obtaining a license" shows that relevant departments are gradually regulating e-commerce. The draft also mainly focuses on guidance and standardization. "This regulation mainly standardizes the C2C online transaction model. For law-abiding individuals, such regulations could be beneficial and make this market more standardized."

The joys and concerns of shop owners

In 2007, China's online shopping market reached a total transaction volume of 59.4 billion yuan. Taobao alone had 53 million users in 2007.

While internet personal transactions are flourishing, they are also rife with false and deceptive information. In July 2007, Mr. Li, a netizen from Hubei, narrowly avoided being scammed by a counterfeit website when he was about to make an online purchase and transfer money, discovering the issue just in time to prevent a loss. Incidents of fake goods, inferior quality products, dissatisfaction with purchased items, or economic losses without recourse occur frequently.

Hu Gang, a lawyer at the Chaoyang Law Firm in Beijing and legal expert of the China Internet Association, said that with the rapid development of e-commerce, the previous State Council regulations on internet information management no longer suit the current situation. "Websites for online transactions were initially set up for ordinary users to exchange idle items. Later, personal users began selling many products on the platform, which is no longer simple exchange but rather something that needs to be regulated."

It is particularly noteworthy that e-commerce service websites like Taobao, EachNet, and Paipai are not registered in Beijing, so they are not subject to the jurisdiction of this local regulation.

Despite this, the collection of opinions still attracted considerable attention from netizens.

"In the future, displaying merchants' identities online will make me feel safer when shopping online, especially when buying large items," said Xiaoyuer Bobo in the Taobao discussion group I established.

However, more store owners express doubts and unease, with increased costs after obtaining a license being their biggest concern.

"If in the future we need to obtain a license to open an online store, then taxation and other obligations will surely follow, greatly affecting us who start online stores at low cost," said Xiao Ou, part of the floating population in Beijing, who runs several online clothing wholesale stores with friends.

According to reports, registering an online store is very simple; you only need to verify the authenticity of the store owner's identity. Xiao Ou told reporters that sellers only need to show their ID, bind it with their bank account, and there are no other special requirements.

"Online clothing sales save on rent, utilities, labor costs compared to physical stores, allowing prices to be much lower than physical stores. Low prices attract customers, and at the end of the month, you can still make quite a bit. But licensing and taxation would increase costs and lose price advantages," Xiao Ou worriedly said.

Xiao Ou believes that users now buy things online based on price. "If you search for the same product on Taobao, you'll find dozens of pages of links. If your product is more expensive, who would buy it? So we rely on thin margins and high volumes to accumulate profits. Once costs go up, many people may stop opening online stores."

Additionally, how to determine whether a personal online store operates for profit raises many questions among some store owners. Store owner Xiao Jin said: "If I sell a 200-yuan item for 100 yuan, does that count as operating for profit? Currently, many Taobao products are priced far below actual value; how should this be defined?"

Not only that, but this local regulation might not even achieve its supervisory effect. "There are very few independent C2C websites in Beijing, and Taobao, EachNet, etc., are not registered in Beijing. This might lead more users to abandon independently registered domain websites in Beijing and turn to others like Taobao, EachNet, etc., making this regulation possibly nothing more than a piece of paper." An expert in internet policy research said this to our reporter.

With licenses coming, could taxes be far behind?

Online shopping is cheap and convenient, but very few merchants actively pay taxes or provide invoices. Although it is only a local regulation, it seems to herald the arrival of the era of taxing online transactions.

Lin Ya, Secretary-General of the Beijing E-Commerce Association, said that currently all enterprise users in online malls undergo strict reviews, and taxes are paid according to the regulations of the industry and taxation departments. However, taxing personal online stores remains a blank area, and relevant government departments have not yet issued corresponding management methods. Reporters also learned from Taobao, EachNet, and other websites that during the signing of agreements with personal users, networks remind users to voluntarily pay taxes.

In July 2007, a trial in Shanghai involving the first case of online transaction tax evasion nationwide may still leave an impression on people. Defendant Zhang sold nearly 2.9 million yuan worth of taxable goods under the guise of a company, sentenced to two years in prison, suspended for two years, and fined 60,000 yuan. The topic of taxing online transactions sparked heated discussions in society.

Subsequently, in August 2007, at the "Experts Seminar on E-Commerce Environment Construction During the Eleventh Five-Year Plan Period" hosted by the China E-Commerce Association and the Institute of Finance and Trade Economics of the Chinese Academy of Social Sciences, experts engaged in intense discussions on whether personal online transactions should be taxed, the timing and means of taxation. It is understood that the Institute of Finance and Trade Economics also wrote a special research report on the issue of taxing C2C markets and provided it for relevant departments to reference when making decisions.

Moreover, as early as April 2007, the Ministry of Commerce issued the "Ministry of Commerce's Guidelines on Online Transactions" (draft for comments), which did not specify clear regulations on taxing online transactions, and the State Taxation Administration has not yet issued any management regulations for online transactions.

"Regardless of how it happens, taxes will definitely be collected in the future, but how to collect them, who collects them, and how much to collect are all issues that cannot be resolved by one place alone," Hu Gang believes that if existing tax laws are applied to regulate e-commerce transactions on the internet, operational difficulties are significant. For example, determining jurisdiction, defining taxpayers, confirming the origin of goods, defining personal transaction behaviors, etc.

Moreover, taxing online transactions cannot simply rely on basic industrial and commercial registration. A huge system project regarding backend investments in registration channels, manpower, financial resources, etc., is required, but the first step is to register and acquire the personal information of online traders.

Perhaps requiring internet operators to obtain licenses as proposed by the Beijing model is the first step toward future taxation. However, once the taxation procedure starts, it could have a significant impact on personal online stores, and some small-scale stores might face the possibility of exiting the C2C market.