Legalities

Credit Card Headaches

A Posting to the SewBiz list November 1999

There is a little known rule with VISA and MC. If you take a phone or e-mail order you are accepting all the risk of the transaction. This means that your customer can lie to his credit carrier and get his money back from you, and keep the merchandise. Many versions of what can happen are possible. I have been struggling with several over the past few months and have finally decided that you can fight City Hall or VISA/MC. I'm giving up my merchant account because it has cost me too much in all kinds of fees cutting into my profit and, in this last problem, I even lost so much money I ended up paying more than I made.

My first experience was afforded me by a customer in Washington state. He told his credit company that the machine he ordered from me was never delivered. A chargeback was issued by his company. When it got to my company they took the money from my business checking account without notifying me first. Three days later I get a packet in the mail about the chargeback reason and given 10 days to respond - 10 days from the time of the chargeback 3 days before. They didn't care that things in my account were bouncing in those 3 days because I did not know of the withdraw. Plus, I now had to prove the package was delivered. I contacted my supplier in New York who had to have UPS trace the package to prove delivery - which they charge for BTW. A copy of the signature card was sent to my bank and the money was returned to me.

Unfortunately, this was not the end - the signature was that of a receptionist in my customer's building that normally receives deliveries. This gave my customer the right to issue a second chargeback since the signature was not his, which he did, and once again the money was taken from my account without prior notice creating a second mess for me to deal with. UPS had to send a person to the delivery address and talk to the receptionist and get proof that she gave the package to my customer. A service we again had to pay for. My money was finally returned as the customer had to admit he did get the package.

As if that wasn't bad enough - I am now dealing with a customer in Florida who tried to cancel an order after I had shipped it. He was told he would get a refund if he refused delivery to return the product, but he would not be refunded the shipping and handling fees because UPS was going to charge me whether he kept the machine or not. He did not like this but agreed to it. Before I could get his refund processed he issued a chargeback for the full amount of the bill claiming that he canceled the order and never received the machine. His company sent my company the notice and my company took the money out of my account and I again got a notice 3 days later asking to prove that the customer didn't deserve the refund. I sent copies of many e-mails he and I exchanged during the ordering process, the invoice showing date of shipment and the e-mail with his cancellation request dated, and explanations of phone calls to and from him with me and my supplier in New York, all to prove I did make shipment and was due the cost. But I got denighed by my bank because I can not give them a signed paper saying he agreed to my return policy.

I am quit upset by all this. I am very sorry this guy doesn't want to pay for shipping of a machine he did not keep BUT I have had to do this many times. The company I work for does not refund shipping fees, nor does any company I know of. Why does VISA think they have the right to say what my refund policy should be? Why do they have the right to take my money before giving me a chance to solve a problem directly with my customer first?

Yes, I know they are fighting credit fraud like a wife who uses her husband's card without permission, or kids who use Daddy's card to buy something over the internet that he does not approve of. The credit companies want to protect their card holders, but there is no protection for the merchants.

I have complained to the customer service department of my bank but can get no one to explain why this is so. I am going to cancel my merchant account and take down my site. It's just not right for some one who is trying to do an honest business to get treated this way by VISA and MC. Any customer can just lie to their company and I loose my money. They don't have to prove a thing, but I have to cover all the bases. It's just not worth the trouble. I don't see how mail order companies survive with these rules.

So to you all, my sewing business friends, a little advice - If you think you need to accept credit cards than do it only locally in your shop or at a show where you can meet the customer personally and always get a signed receipt - AND have a refund policy clearly written on the invoice they get. In some cases Credit companies even have rules as to where your policy needs to be on the invoice in respect to the signature, and how big the words have to be. So, read all the fine print on your welcome packet and cover your a$$.

Our Visitors ask Questions

Business License
I live in California and am looking into getting a business license to be a seamstress, alteration, decorative sewing, etc.

Google your local county tax office. They can tell you if you need a license and tax number. Otherwise check your local extension office at the nearest community collage. They will have publications to give you for free on all kinds of laws particular to your city and county.

~Lea
Local Regulations
added May 2003

How would one go about applying for a business license as a retail boutique and be able to design some of the clothing under a more personal name and label. Could I still keep the structure as one company. Retail and manufacturing? I know I would have to keep my bookkeeping in a separate categized order. Please help! I know you can!

Thank You!

Contact your local Extension Office at your local Community Collage. They will have pamphlets that spell out the local laws and how to do these things in your town.

~Lea
Pattern Copyrights
added May 2003

Hello !

I read a question one onlooker had, but I never found the answer to this particular question. Is it legal to sew off a pattern such as Butterick and sell the clothing to the public? I called the paten office and the guy on the phone says he thought that would be fine. Well, I need a more definite answer. I'm sure you can help me.

Thank You!

Easy definite answer - it is never legal to sew off a commercial pattern and sell it to the public. BUT - it is rarely prosecuted. Using one pattern for one customer is never a bother to the pattern companies and they even don't mind you using one pattern for 6 bride's maids, but if you are planning on manufacturing many garments from that one pattern for sale you are asking for trouble. Of course it is only if you get caught, but I do not recommend you bank on it.

If you are planning on having a business that makes custom clothing, you need to learn how to draft your own patterns. Using ideas from commercial patterns is not the same as using the pattern as long as your basic design is yours and not theirs.

Some pattern companies allow this if you request a license for it. It will cost you some money, but may save you time in drafting and will keep you legitimate.

~Lea
Safety
added October 2001

I am interested in setting up a sewing studio at home but I am somewhat worried about my personal safety especially when I have customers come in for fittings or to discuss designs. How do you protect yourself?

Personal safety is a concern if you are just starting out having strangers coming to your home, but it's not as big a problem as you might be afraid of. I do most of my fittings away from my home, but when I do have customers they are usually female. And most times, I am setting appointments when there are other people around, so I am not alone.

When, on very rare occasions, I have a male customer come for a fitting, he usually comes with a wife. I never allow men to come see me alone, especially if I have not worked for them or their wife previously. More often than not, the wife (who is already a customer) will bring some things her husband needs done when she needs a fitting.

In the 20 years I have been doing this I have felt unsafe only twice. They were both male customers and I was working alone in my storefront shop in North Carolina. Nothing happened either time because I phone called a friend to come over from the neighboring store until the customer left. We had set this up with a key phrase I could say over the phone that would say I was in trouble and she would come over for a "coffee break".

So, the best defense you have in personal safety is to not be alone. You control when you make appointments. Don't ever let a customer dictate to you a time you are alone unless you already know them well. Have a neighbor handy to call if you feel a situation might not be safe.

~Lea
Getting Started
added October 2001

Please help, I want to start an at home sewing business, but I have questions and am not sure where to go or where to start with these questions. What kind of licenses do I need, are there any regulations on sewing at home and selling to the public and can I sew off of a pattern and sell it, if I have changed that pattern somewhat. Am I restricted as to what kind of care instructions I can put in my garments. These might be silly questions that I should know the answers to, but as I said I just don't know where to start. I also wondered what I would have to do to get to sell online.

I would really appreciate any information that you could give me.

A good place to start is your local Extension Office. Look under the business section of your Yellow pages. They will have free publications for the laws and zoning rules for your area. Unfortunately the rules differ all over. When I was in North Carolina, I didn't have to collect sales tax, but here in Ohio I do. The zoning rules will also tell you how you can run a business out of your home. Many communities don't like lots of traffic coming in and out of residential zones so they would regulate how many customers a day can visit you. This will also tell you if you can have employees.

Next you'll need to find your local tax office to get your business license. (The Extension Office should be able to tell you where to go) This is really a tax number so you can collect and pay sales tax. You may not need to collect tax depending on the laws in your area, but you do need to find out first because if you don't collect when you should you can get in a lot of trouble.

~Lea
The Legal Leap
added September 2000

Thanks for all this useful info. I want to go ligit, after 2 years of keeping records in an envelope but I'm having trouble making the legal leap. Will it be worth the trouble I wonder. Your writings make it seem possible.

It really is best to be legal. Besides the tax benefits, it keeps you safe from the IRS fining you. It's well worth the trouble of getting things set up.

~Lea