What liability is established for inappropriate online sales? Who can check the seller’s compliance with the law, and how can it be done? Elena Sapego, a partner of Stepanovski, Papakul and Partners Attorneys-at-Law, and Olga Ivanenko, founder of Business Start Company provide answers.
— Here are some examples of common violations in sale via webpages, social networks, marketplaces and e-shops.
Illegal business operations
Our examples relate to illegal business operations as systematic profit generation from sale of goods (rendering of services, performance of work):
- Without registration as an individual entrepreneur (without opening a legal entity)
- And/or without a special permit/license, or in violation of the rules and conditions stipulated in special permits/licenses
It entails:
- Administrative liability (Article 12.7 of the Administrative Offense Code). Depending on the offense, penalties may reach up to 200 base units (for individual entrepreneurs) and up to 500 base units (for legal entities), with confiscation of the profit generated by them.
- Criminal liability up to restriction of liberty, when the offense is related to generation of a profit in an extremely large amount (Article 233 of the Criminal Code).
Violations may be identified upon a controlled buy, not only through e-shops, though.
Advertisements posted at marketplace or pages in social networks are also monitored.
Example 1: Administrative prosecution (data from the website of the Ministry of Taxes and Duties). The tax inspection made a controlled buy upon monitoring of advertisements about the sale of sports footwear that had been posted at a VKontakte page for 7 months.
As it was found out, the seller carried out business operations without official registration. Resolution of the Economic Court provides for:
- A penalty of 4.5 million of non-denominated Belarusian Rubles with confiscation of goods for a total of more than BYR 67 mln
- Payment of the uniform tax on individual entrepreneurs for 7 months, for BYR 21 mln
Example 2: criminal prosecution (data from the website of the State Control Committee). Five criminal cases for illegal business operations – sale of goods through social networks – were initiated in Baranovichi in the previous year and at the beginning of 2016. The profit is estimated at 1.8 bln non-denominated rubles. Two persons have been sentenced: restriction of liberty for 1.5 years each (suspended) plus levy of the illegitimate income (232 mln and 346 mln, accordingly).
A screenshot of the VKontakte website
Sale of goods without supporting documents, control symbols, cash register
The monitoring is performed as controlled buys. Violations entail serious material liability.
Example 1: the tax inspection and the economic crime department of a Minsk district made a controlled buy. The inspection revealed an individual entrepreneur who carried out ‘shadowy’ sale of telephones, tablets and accessories through an e-shop. Violations committed by the entrepreneur:
Sale of goods without documents supporting their procurement/receipt (Part 4, Article 12.07 of the Administrative Offense Code).
Potential punishment: a penalty for an individual entrepreneur or a legal entity of up to 50 basic units with confiscation of goods, proceeds from sale of goods (performance of work, rendering of services), or without confiscation.
Absence of cash registering equipment at sale of goods (Article 12.20 of the Administrative Offense Code).
Potential punishment: a penalty for an individual entrepreneur of up to 100 basic units, for a legal entity – from 10 to 200 basic units.
Sale of goods without control symbols/identification marks (Article 12.35 of the Administrative Offense Code). A penalty for an individual entrepreneur or a company of up to 20 basic units with or without confiscation of goods.
In this case, goods (telephones, tablets and accessories) for more than 4 bln were arrested and seized based on the inspection outcomes.
Example 2. the tax inspection and the economic crime department of a district of the capital city made a controlled buy of laptops in an individual entrepreneur’s e-shop.
It was established that the laptops were transported, stored and sold without documents supporting the legitimacy of their receipt. No control symbols were attached to them.
Goods for more than BYR 170 mln were arrested and seized. The tax inspection brought the entrepreneur to administrative liability – a penalty of BYR 3.6 mln. The Economic Court brought the entrepreneur to administrative liability as well (a penalty of more than one million rubles plus confiscation of the seized property plus confiscation of his income of BYR 727 mln).
Tax base understatement
A seller – an individual entrepreneur – was selling TV sets by posting his advertisements in a popular e-catalog. He submitted a tax statement for the 2nd quarter of the last year declaring the sale of 10 TV sets.
However, according to the tax inspection, the entrepreneur’s marketplace page had 368 feedback replies from TV set buyers for the same period. An additional tax amount was charged.
At the same time, it should be mentioned that, though trading sites check feedbacks and comments, some vendors find ways to ‘inflate’ feedbacks and increase their number.
This brings along the issue of choice between positive feedbacks and extra taxes.
