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Ecommerce Law Representation Made Easy With Rafelson Law
Paul Rafelson is a Partner at Rafelson Law, a firm that understands the unique needs of e-commerce entrepreneurs. They bring the expertise that helps companies expand and protect their assets from the challenges they face. With 15-plus years of experience in complex tax, litigation, and M&A matters, he is a trusted resource, frequently quoted in the press about Amazon and e-commerce intricacies.
Before private practice, Paul worked in-house at some of the world’s largest companies, including Microsoft, Walmart, and General Electric. In addition, he is the Founder of SellerBasics, the Chairman of the Online Merchants Guild, and a professor at Pace University School of Law in New York.
Here’s a glimpse of what you’ll learn:
- [02:47] Paul Rafelson talks about Rafelson Law and how it helps entrepreneurs
- [04:08] The value of working with a law firm from the early stages of your e-commerce business
- [09:19] The challenges Amazon sellers face
- [12:27] Paul explains how his SellerBasics program helps Amazon sellers
- [18:35] The process of working with Rafelson Law
- [21:59] Tips for successfully appealing Amazon suspensions
- [26:36] How to prepare an Amazon business for sale and navigate sales tax issues on Amazon
- [33:42] Paul speaks about the Online Merchants Guild and how it supports e-commerce entrepreneurs
In this episode…
Being an e-commerce entrepreneur and selling on Amazon has its fair share of difficulties. With millions of others to compete with, it can be arduous, not to mention having to prepare to navigate the legal implications you face when you’re an Amazon seller. How can you expand and grow an e-commerce business while protecting your legal rights?
In addition to concentrating and creating a thriving brand, the legal challenges you run into as an Amazon seller can be overwhelming. If you lack the knowledge to handle the legalities, including account suspensions, intellectual property disputes, antitrust laws, or sales tax issues, it’s vital to recruit an advisor. Paul Rafelson recommends hiring a law firm that can provide solid advice to businesses in the e-commerce space. With the expertise you need on board, you’ll be ready to manage the legal complications, ensure the success of your business, and prepare for your eventual exit.
In this episode of the Quiet Light Podcast, Pat Yates sits down with Paul Rafelson, Partner at Rafelson Law, to discuss navigating e-commerce law. Paul explains how Rafelson Law helps e-commerce entrepreneurs, the challenges Amazon sellers face, the SellerBasics program, preparing an Amazon business for sale, dealing with sales tax issues, and how the Online Merchants Guild community supports e-commerce entrepreneurs.
Resources mentioned in this episode:
- Paul Rafelson on LinkedIn
- Rafelson Law
- Online Merchants Guild
- Quiet Light
- Quiet Light on YouTube
- Joe Valley
- Pat Yates on LinkedIn
- Mark Daoust
- Quiet Light Podcast email: [email protected]
- The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
Sponsor for this episode
This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.
There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. They provide trustworthy advice, effective strategies, and honest valuations. So, your Quiet Light advisors aren’t your everyday brokers — they’re your partner and friend through every phase of the exit planning process.
If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.
Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on its website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!
What are you waiting for? Quiet Light offers the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.
Hey folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips and entrepreneurial stories that will help founders identify and reach their goals.
Pat Yates 0:32
Hello, and welcome to the Quiet Light Podcast. I’m Pat Yates sitting in for Joe Valley. Today we have a great episode if you’ve ever thought about legal issues going on either starting a business or a current business, where it would relate to Amazon with relation to trademarks, anything like that. We have a conversation today with Paul Rafelson with Rafelson Law who is really kind of insightful. People out there looking at law stuff need to understand, first of all, when you’re going to eventually sell your company, let’s say through Quiet Light, you need to have a moat around. If you have a product need to make sure its trademarks or the business name is trademark, all these things are in place for you to be able to make sure that your business can be optimized from a legal standpoint. Paul himself is at Rafelson Law is a number one go to law firm for online business facing legal challenges and digital sellers looking for the best deal when exiting their businesses. They in 2021, they facilitated 60 plus online business exits for over $238 million in exits. They do a lot of help with relation to closings, they forward a lot of people to Quiet Light. Paul is also the founder of sellerbasics.com, which can give you monthly legal help on anything you need with e-commerce and also has a business called Online Merchant Guild, which is really cool from a standpoint of legislation going forward in e-commerce if you’re trying to look at it. Obviously, this is a great conversation because these legal things, whether it’s tax, whether it’s trademark, or any of those other things are all really important things in your business. So I’m excited to talk to Paul about this again, Paul Rafelson from Rafelson Law. Let’s get right to it. Paul, welcome to the Quiet Light Podcast. It’s great to have you here today.
Paul Rafelson 2:04
Hey, it’s great to be on your podcast. This is awesome. We are big fans of your company, and we know many of your clients. So no, it’s awesome. Thanks so much.
Pat Yates 2:14
I appreciate that. We know that you’re kind of in the same space, you send us a lot of referrals. So I think you’re gonna be really, I’m really excited to talk about this today. Because I think you cross over and a lot of different things. I mean, people are intimidated by lawyers to begin with, you know, nobody likes you. That’s the first thing we know. But it’s always good to at least hear some of the things that are going on in e-commerce. So let’s jump right into it. I know you have Rafelson Law, which is your main practice and you help Amazon sellers, from a broad sense of different things that they could come at you with explain a little bit from a high level about what Rafelson Law does.
Paul Rafelson 2:47
Sure. So like you said, I built this law firm, I spent most of my life as an in-house lawyer. So, I was a lawyer for Microsoft or Walmart for General Electric. I never wanted to be in private practice. But I was also an Amazon seller 20 years ago, I don’t know 18 years ago, I’m trying to remember trying to do math, but like early like, 03, 04, 05 I was selling on Amazon, and other platforms like eBay and half.com. And just kind of wrote a blog post snowballed into a law practice. And our law practice is designed to do a couple things. One is to address the fear of lawyers, right? Well, why do you fear lawyers because you fear open-ended hourly built, and so we try to flat rate and do as much as we can on a flat rate basis to kind of take that fear away upfront pricing, when we can. The other thing we do is we really focus on being plugged in on what an e-commerce Amazon seller needs. So we’re really trying to be subject matter. I can’t use word experts, but very aware of the subject matter how about that, that is troubling most of our clients, and that’s a blend, it’s a hybrid of intellectual property, its compliance, legal compliance. Its business law, its tax law. And so we’ve kind of built our law practice to just kind of be hyper-focused on okay, what is it that these new breed of online businesses, right I call them the global small businesses of e-commerce what do they need and we sort of built our practice to be hyper-focused on them from sort of, we say launch phase growth phase exit phase and of course the repeat phase because most of our clients when they exit as you know, like to start over again and do something else, like take a couple of weeks off and then they’re already working on the next brand if it’s not already in the works.
Pat Yates 4:37
I mean, that’s really incredible so a Quiet Light we do the same thing obviously we don’t get someone in in the very beginning but we go through the sale process a lot like you. When clients reach out to you are they more looking at how to prepare do they typically come to you ready to sell if you’re looking at that or they come in kicking tires, trying to figure out from the legal side, all the things they need to prepare?
Paul Rafelson 4:58
Yeah, I mean, I think they come to us late most of the time, usually it’s longtime, they already have a letter of intent in hand. But we always encourage people because as you know, like when you go through the closing process, like go through process of closing a deal, issues pop up. So we’re always big advocates of like, come work with us early, let’s catalog your IP, let’s apply for more trademarks. I mean, gosh, this is something that is a pet peeve of mine, being so heavily focused on exits, and in the lost sight of what I do and having, I think we’re climbing we’re close to half a billion closed since 2020. Which for our little term, and we’re not a huge law firm, right? So as I’m pretty impressed that number, but what I always say is like, like trademarks, for example, everybody thinks you just gotta get one trademark because that’s what Amazon brand registry requires, then you’re done. And it’s like, well, no, if you have variations, right, so I say, look, think of the cereal aisle, right. Think of all the cereals that Kellogg’s makes, right? There’s rice Krispies, there’s Cocoa Krispies, there’s Froot Loops, there’s Apple Jacks, those are all brands, right? So if you have variations of your product, or differing products, with different names, like you should be cataloging that IP, you should be registered, because when you go to sell, what are we going to tell the owner? What does the owner expect you to say? I rep and warn that I have this intellectual property that I have the right, so if you’re selling a cereal product called Froot Loops, right, and you had no idea there was a company on Kellogg’s out, there’s like Froot Loops, you may run into some trouble on exit time when you’re like, oh, this is my hero, Asin. And it’s using this branding. And I have no idea whether or not I actually can use it, because I never chat. So there’s a lot of and that’s just one example. But there’s a lot of reasons why we really love to work with clients early in the process, and we give them advice. So we talked them to about choice of broker and I am a fan of Quiet Light, I’m happy to talk to you what I liked about Quiet Light, but what I find interesting is that I feel like Quiet Light has been in the game longer than some of the other brokers that have popped up. But I find that that’s really important. Because you know, in the 2020-2021 market when you had aggregators, and you could probably almost not that I would recommend this do it yourself and just send an email out to 50 aggregators, and probably get 50 offers, right? Those days are gone. Right aggregators, like kind of a dirty word, right now. Their business model struggles at high interest rates. So the buyers that we’re seeing are really attribute to your network of who you’re connecting with, right? You’re bringing in buyers from all over the place that are just outside of the realm of aggregators. And I feel like a lot of the newer brokers that popped up in the last two years just aren’t, they don’t have that depth. And so I’ve been a big fan, because I’ve seen you guys close, bring buyers for deals that are just really good, and really not conventional, sometimes in terms of like, the type of business like, actually business where like, yeah, you’d have a hard time selling that business for an aggregator, what do you do? And it’ll get a deal. And then they go to you guys, like, oh, here’s a buyer, okay, it’s wholesale, that’s fine. We have a buyer for that. I’ve been really impressed with Quiet Light. So I’m definitely a fan. I’m not here to do that. But I just thought I’d share since we’re talking.
Pat Yates 8:24
Oh, actually I love that you’re doing that, people out there obviously understand who Quite Light is. And things like this, Paul are obviously important, because I think that one of the biggest differences in Quiet Light in a lot of firms is that, we take sort of a slower process. We have 15 of the smartest people I’ve ever seen that can work with any business have either been in this business, you can’t find a business that someone Quite Light hasn’t touched or sold or owned or something. So the depth of information to be able to get people to market is huge. And the trust with buyers is there. I agree with that. So Paul, let’s jump into the Amazon thing a little bit. I think people get really intimidated about Amazon. I’m one of the people that is sort of a seller that is more than frustrated with Amazon from a standpoint of how they treat their sellers. Because any day your account could be at risk. So tell me a little bit about the kind of clients that come in and what the issues are that they’re seeing with Amazon, maybe people don’t realize all the things that could pop up.
Paul Rafelson 9:19
Yeah, so it’s a bevy of issues. So you’ve got sort of offense and defense, right? Think of it like a football game, right? So you’ve got offensive issues and defensive issues, right. So to me, defensive issues tend to be ones where you’re under attack, right? So you can have issues where your competitors are doing really awful things to you. Your competitors are messing with your flat files and causing your product to get flagged as something that it shouldn’t be, there’s a ton of fake reviews that pop up on your account that are negative. So you’ve got that kind of sign then you got sort of like kind of the offensive which is really about your ability to sell and are you complying. Amazon over the last few years, you have to understand has gone through a transformation. They’ve always, historically, since their inception have always kind of relied on this idea that they’re just the flea market. They’re an intermediary party in the transaction. They’re neither the buyer nor the seller, they’re just the platform. And with that, they’ve been able to get away with a lot of not being, they’ve been able to basically shield themselves from liability by making that argument. But the courts have changed there, too. They look at Amazon, they look at the transaction, they look at how much control Amazon has on the transaction. They’re saying, well, Amazon, you really are like a seller in this context, you’re one of the seller, you are a seller. And so that means that if your product that the product sold through your platform, injure somebody, or violates the law, you can be on the hook. So what that’s done in the last few years has created a massive amount of compliance need in the industry. So we’ve seen just a ton of people coming to us saying, hey, I’ve been selling this product for years. Now all of a sudden, I find out that I might be subject to FDA regulation. I didn’t even know what the FDA was until I just found out about this. Can you help. So we deal a lot with those kinds of issues. So compliance is big intellectual property on both sides, right? So you’ve got the offensive side of IP, you’ve got correct IP, you want to protect it, you want to protect yourself from other sellers stealing your IP. On the flip side, people are accusing you of violating other IP, right, whether that’s valid or not. So, I mean, the issues just kind of go on and on. But those are a high-level kind of what we deal with. And then there’s just sort of the Amazon-ish kind of issues that are just quirky, like related accounts, like I use this three PL who serves like 500 other sellers. And now we’ve got a related account suspension, what the heck, right. So it’s a real smorgasbord of issues. I like that word smorgasbord.
Pat Yates 11:55
Yeah. I agree with that. I think that sometimes until you get into an, I have an Amazon account, you don’t realize all the things that can come up. Because you start looking at account health, you look at all these different things that people are having to deal with making sure they’re in compliance with there’s a lot of moving parts, and people need to be watching that. So tell me this when people come in to work with you, what kind of programs do you have set up? I see that you have a monthly fee. I don’t know what that includes, maybe tell them a little bit about the support groups as you get in maybe the value proposition there.
Paul Rafelson 12:27
Yeah, so we have two ways to work with us. We have a law firm, that’s a full-service law firm, it’s just provides you that sort of launch crimes they repeat, that’s more than the legal side. But what we realized is, Amazon issues, while there’s sometimes legal, underlying legal, most of our competition are not lawyers, right? There’s a lot of people in the Amazon consulting space that are not lawyers that charge a lot of money for suspensions, I think when people had their account, or their ace, their hero asin go down, they get desperate. And it’s easy to kind of hit you up for 510 grand just to say, I know the special people, Amazon or something. That’s not what we do, we do it a little different. So what we do is we build a program that sort of mimics insurance, it’s not insurance, we don’t indemnify your losses. But what we do is we say, look for $100 a month, you can join this program, it’s not a law firm, it’s called SellerBasics. And SellerBasics is sort of an account health plan. And so with that, you can have a chat up, if you need to check out there’s no charge. So we call it like Account Health Review. We can just kind of look over your accountant say everything looks good. We also cover like consultations with lawyers. So what we’ve done is we’ve built a network of lawyers who participates on the basics and basically facilitate the introduction get you like a 20-minute consultation case you have a legal question. But the main thing people love about SellerBasics for that $ 100-month price point is that if their asin goes down, if their account goes down, right if they have a major issue, resellers love it, because we also cover the IP claims the pesky IP claims that resellers have to deal with on a daily basis. We don’t charge extra for that. We basically will go to war, we will handle your case, we will take on Amazon, and we’ll do everything in our power to get your account or Asin reinstated or however fixed you know when it depending what the issue is. And we don’t charge for that it’s just $100 a month. So, now you have a plan. Now you’re running your Amazon business, you’re paying 100 dollars a month, you have resources you can use on the way and you certainly have a plan for what happens if you get suspended you contact us and we go to work, right? And we work on getting your account or asin back. And that’s really the nature of the plan. That’s how we kind of decide to do it because we just think that the industry of charging five or $10,000 for an account suspension is a little much.
Pat Yates 14:54
No, that makes sense. I mean, sometimes in that situation you’re adding insult to injury when you’re losing revenue and having to spend a lot of money to be able to get out there and do that it’s a great service to be able to make sure they’re protected. When people come in to work with you, again, folks, we’re talking with Paul Rafelson with Rafelson Law talking about Amazon law, when people come to you, or they already typically in a bind, or they come into you, would you rather them come to you and start having you do an overview? So you are proactive? I mean, is it a reactive or proactive thing? Or is it both?
Paul Rafelson 15:24
It is both, I mean, obviously, one of the things, in order to have an insurance style, again, we’re not an insurance company, but we definitely borrow from their mathematics, right? To have a program where we can offer no-charge account reinstatement services, for an $100 a month, we need people to be members before the bad thing happens. So it’s kind of like that old insurance where it’s like, we’ve preexisting fees, right. So if you come to us suspended, we do have to charge more, because we have to protect the value proposition of our membership, in salary basics. So or if you don’t want to be a part of a membership, you can work with our law firm, directly and pay the law firm, or you can pay somebody, it’s sort of, we have different ways. But the idea is, we really think people should be thinking about this stuff, obviously, early on, and we think the program is really built, I mean, $100 a month, after-tax deduction, it’s like two bucks a day, it’s really not a lot. And I think people should use it more, I think people should take advantage of the concentrate, have a conversation about your LLC, you have a conversation about taxes, have a conversation about your IP. We really encourage people to do it, do they? Not typically, they just don’t, I think people don’t tend to be proactive when it comes to their account health, they tend to be reactive. I do think that it’s a problem in the industry. I think that’s just bad business, not to be judgmental, but I’m just saying, like, I think like, you’re spending, you’ve got a business worth, millions of dollars, we know what happens especially with brand owners, we know what happens once they hit a certain threshold of discretionary earnings, right, you start to see that enterprise value and you start wondering something, why aren’t you taking this more seriously? Why not be more proactive? Why not protect those trademarks? Like we talked about earlier on at the beginning, right? Why wait till you’re a few weeks out from closing to find out that your buyer is concerned that you may not have the right to use certain trademarks, you’re using your business, why not do that proactively? So I’m obviously a big believer in proactive. I think it’s a hard message to get out, though. I think it’s just the nature of human nature. And I’m no less guilty of this in my life, right? And other ways, right? We just tend to procrastinate or just kind of focus on the immediate fires and not the Tinder. That’s lurking in the back. Right, which is nature.
Pat Yates 17:48
It is really incredible, Paul, because when you talk about this, the more I think about it, I think the real barrier to people utilizing a lawyer on regular basis is they’re expecting they’ll send an email, get an hour bill for 500 bucks just for asking the question. And some of these things are very basic. And I think people have a tendency not to reach out if they feel like that is an expensive undertaking. But this allows them to say if there’s a little thing ticking in their head, like maybe I do need a candidate a trademark, maybe they get to ask you a question of can you do this? I think the setup and the way the plan works is incredible. But let’s talk a little bit about what happens if let’s say someone comes in and they have an account health issue or their pending suspension. And it’s not it, let’s say it falls under your regular plan. What’s the process? Do you guys file the claims with Amazon? Do you give the information to the client to do that? How’s the process work on the back end?
Paul Rafelson 18:35
Sure. So you’re precisely right, like I mean, we’re well aware that people don’t like surprise bills from lawyers, we’re fully aware that, and we built the model appropriately. And to address just quickly your point about that sort of 15-minute phone call, like it’s sort of like the Geico commercial, like 15 minutes can save your business, right, like so 15 minutes, whatever, but that’s sort of the inspiration I had, because when I had a lot of like, when I first started, I was doing a lot of sales tax calls. And people just were making really terrible mistakes on sales tax, like they were doing things to their business that just was not within, they were listening to software companies that were just pushing their own agenda. And it’s like, you guys have no idea. And I’m like, and then they’re getting these letters from the government saying they owe their life savings. And I’m like, Man, if I just spoke with you for five minutes before you did that, I think I could have sent you a world of grief. And so that was the inspiration actually behind the 15-minute consultation is that like a lot of fires will be put out before they start if you just phone a friend, right phone a lawyer, and there’s no basis for charging because we don’t have a retainer agreement with you. It’s just a 15-minute phone call you can listen to us. If we say Hey, this is what you need to do, and it may cost more. That’s a later on that you can decide but we really do try to resolve a lot with a 15, 20-minute phone calls and enable you to do as much as you can yourself as well, we’re not here to sell you a new LLC or sell, you know, that’s not really the end game. So now as far as what happens if somebody comes to us and they remember the program and they’re suspended, I mean, they just go onto our website, they can literally fill out, there’s a portal and seller basics they can go on and they can fill out, tell us what happened, paste any, it’ll tell you, you know the pace the messaging from Amazon, paste any supporting documents you have. And that just triggers a ticket in our system, and then our team is just on it, and then we’re in communication with you going over any questions we have, and then we put the appeal together. And then what we do is we just think it’s a matter of better practice not to be connected to other people’s accounts, especially given how related account suspensions are out there. So we will provide you with the appeal. And we’ll tell you, here’s the appeal submitted to Amazon as an appeal. If that doesn’t work, we’ll come back with another appeal. If that doesn’t work, maybe we send an email to the executive team. If that doesn’t work, maybe we figure out how to contact Amazon other ways. But we really try to fight really hard. We have a lot of channels that we can go through to try to fight for, for these members who have these issues.
Pat Yates 18:35
All that really makes sense. And I know that having done this once I remember many, many years ago, I don’t remember what the issue was that we had, but we had to submit a plan to be able to correct action on Amazon, whatever the issue we had that we were had going on, it’s very small went away. But when I did that, I sort of found out that you really only get one shot at these appeals or sometimes you get more, but it really needs to be submitted correctly. Like there’s almost a template to how you send this how you say you’re going to be actionable. So Amazon approves it. Tell us a little bit about that, or people probably not advise to do something like that on their own because you have the experience of what these people are, what Amazon’s gonna want to know what can help them navigate that process. Is that correct?
Paul Rafelson 21:59
Yeah, there’s a couple things that are always at play here. So I mean, I don’t want to go into full fear-mongering to say you only get one shot. I don’t believe that. But there’s always a way around it. Like if you’re in the right, we have our ways to like get the message, we think to Amazon, if you’re in the right, right, if you’re a fully in the wrong, it’s a different story. And this is one of reasons why we always deter people from writing those appeals, because we’re like, some people have this belief. This is an old sort of folklore. From back in the day that you have to apologize to Amazon, you always have to admit some guilt are wrong. And actually, we don’t do that. If legitimately, client messed up, yeah, then we have to do the whole plan of action. Here’s what we’re gonna do to fix the problem in the future. And here’s a mistake, that whole template but we don’t default to that we look at the messaging that Amazon saying sometimes Amazon’s messaging is wrong, right? Like it because they’re the people who are writing it not always in the US, maybe not fully familiar with our laws and sort of are just kind of go off on a tangent. So first thing first is you really have to dissect, decipher the code. And I think that’s something our team is very good at. It’s just kind of reading through the BS, because sometimes their suspension statements make no sense. I’ll give you a classic example we deal with regularly, which is for resellers, resellers constantly get these intellectual property claims for reselling branded products on Amazon, which Amazon allow, that’s a common mistake that brand owners make because they spy all these IP counterfeit complaints against genuine resellers, which you’re not supposed to do. You’re not supposed to use Amazon’s brand registry tool for that purpose. And sometimes when you file an appeal, the response from Amazon will say, you need a letter from the brand authorizing you as an authorized reseller. Well, absolutely you do not actually. And in fact, it says in Amazon’s intellectual property policy, and their seller code of conduct that they don’t follow authorized dealer relationships, they don’t believe in that they believe in something called the first sale doctrine, and you’re basically either right to resell. Now, that’s all up for debate legally, but what isn’t up for debate is you can’t use Amazon’s brand registry tools to file a takedown. And if you haven’t taken down, what you really need to be focusing on is how are you going to prove to Amazon that your goods are authentic? Because that’s really the question here has nothing to do with being authorized by the brand. That’s just a mistake that Amazon script is constantly churning out. But what Amazon’s really looking for is they’re looking for authentic invoices. So if you have a receipt from Walmart, great if you have a receipt from Target, great. If you have a receipt from Bob’s house of liquidations, and that Bentonville, Arkansas, that’s not going to be so great. Because nobody knows who that is right or in there’s a big issue. But the idea is like I think our team has just given the experience is really good at deciphering the code that what is the Amazon really trying to say? Which is why we don’t encourage you to write things because sometimes people when they write their own appeals, they say things they make it worse, they say the wrong thing, or they submit the wrong invoice and Amazon will come back and they’ll say oh, you submitted this document this looks fake. And then they call you a fraud. I mean, it’s really crazy how dealing with Amazon can be from time to time. So, I think it is important to have a guide to have somebody help you through the process if you’re not experienced, because it’s just it’s constantly evolving. And unless you’re in it every day, like if you’re somebody who gets suspended once in a blue moon, don’t think what you learned years ago, the last time it happened applies to that, because it’s constantly evolving so which is why, again, I think you need to work with professionals who know this stuff and deal with stuff on a day to day basis.
Pat Yates 25:30
I mean, I 100% agree with that. One of the things that I was thinking about in this, it’s so difficult people have no idea, especially if you’re a new Amazon seller, how difficult it can be to stay in compliance with everything that Amazon wants, you start looking at some of these TV shows where people are buying pallets of Amazon stuff that’s either been lost or whatever sitting there you have vendors, like I had a year ago, this is no lie. In my business, I think I had 170, some orders that people on Seller Fulfilled had gotten labels for that Amazon immediately refunded them, and they never shipped it back. We tried to get it back. But we can there’s so many things that people have to navigate. I mean, let me ask this to so, when you’re coming into work with your group, and again, we’re talking with Paul Rafelson, from Rafelson Law, from an M&A standpoint, I always talk about preparation, like the best work you can do to be able to sell your businesses probably before you sell your business, because you need to make sure that you have a moat around it that your trademarks are good, that everything that you’re going to do, do you recommend that people come in and do sort of a legal update to look at the whole business and say you need X, Y and Z for you to be able to sell eventually? Is it good to come in and try to do that work and see where you’re at?
Paul Rafelson 26:36
I wholly recommend it to people take us up on it very rarely. We’re very busy, firm. And so one of the things we don’t call, we don’t typically do free consultations, but M&A given the gravity, the most important transaction of typically of this person’s life, right? We try to be a little bit more front-end friendly, because it’s a bigger issue that like, we’re not going to sit here and have a one-hour call about whether or not you need a trademark because a trademark is, we make $100 or trademark, it’s like we can’t afford it, it’s just not economical for us to do it that way. We have to charge on the front end for the consultation, if you want that, or however it works. It’s just different. But M&A obviously, it’s such a huge thing. So with that we encourage people to contact us early, we try to kind of coach that advice like hey, let’s look at your IP, let’s look at your, even your pictures can be a problem, right? Because buyers can get annoyed if you hired a bunch of folks on Fiverr to make your listing photos, you can’t trace any of that IP, like how you own it. That’s a problem. Or if you didn’t get a doc, but it’s an easy problem to fix. Especially if you’re not dealing with it in the middle of the deal to deal with it. Now, how do you fix it, make new photos, right? Make new photos and do it the right way, raise your IP or go back and find where those photos came from find out what stock photography licenses are used in the making of the photographs that your fiber person used, things like that, you can easily just take care of. If you’re not in a rush to sell you’re not trying to sell this week, if you have time, you can go ahead and clean that up, clean up your trademarks, files and copyrights. Right, really, really represent that you own your IP, which is so important in a transaction because as you know, when you’re selling your e-commerce business, like IP is all you have, right? It’s IP and inventory. That’s all there really is to it. So I obviously I would encourage people to do stuff like that. I just find again, I think it goes back to my point, I think just as small business owners and not to their fault, because I’m guilty of this too. We tend to just focus on the fire that is immediately burning in front of us. And again, not the Tinder, like not the tinderbox behind it right? That may be even worse, we just tried to put out our day to day fires, and I don’t fault people for that. But I agree, I think it would be you know, anyone who’s interested in selling your business should be looking to do sort of a reverse audit of their assets and IP and just kind of their compliance, making sure that, hey, let’s tackle these issues now. Not when you’re in the middle of due diligence or negotiate in terms of a purchase agreement.
Pat Yates 27:44
That’s really good. I think that Quite Light, especially our philosophy is that, you know, someone comes in ready to sell that day, that’s okay. But typically, we don’t want that. We want them to be three to six months off. We’re not out here looking to get listings every single day, what we’re trying to do is analyze where the business is for the owner and the seller, and where’s he going to be able to maximize that value and sometimes getting the moat around it talking with Paul about these things. If you’re a listener out there thinking about selling, these are things that you need to have done before you come in, because it’ll definitely move things faster. So one other thing that I know that you work on that some sellers are a little intimidated by a sales tax, and I know that’s really a big issue for a lot of people around the country, maybe talk a little bit about how you can help people in those kinds of compliance.
Paul Rafelson 29:55
Yeah, sales tax is a tough issue. It’s actually gotten a lot easier for Amazon’s data because, as of I don’t know, 2021, I think may have been two states, but like, for the most part, I think now, all the state’s sales tax that occurs on Amazon is handled by Amazon. So you’re kind of off the hook, you don’t actually need to register in every state, the way that some of the tax software companies told you that you had to. And there are a number of other arguments out there besides that, that says you didn’t in fact, we want a court case in Pennsylvania, around this time last year, saying that, just the fact that your inventory ends up in an Amazon FBA warehouse doesn’t create nexus, which was the big popular topic of 2017 2018. Prior to the wayfarer case. And so that’s an important distinction, because that was kind of always our position that you don’t have nexus. So right now, what we’re seeing in sales tax is the issue is morphing into something called income tax, which we all familiar with, we pay income tax to the federal government, and depending on what state you live in, you may pay income tax to your state or local governments. And so we’re seeing a push by states to demand income tax, which is a problem that we’re facing. But the other sales tax issue that I think is really affecting people, especially people want to sell is the sales tax issue surrounding your website. So if you’re like my typical Amazon client, if my client, is like, I tend to have clients that are either really, really like they’re either 80% Amazon, or they’re 80%. Shopify, the majority of them are more Amazon and Shopify, I really have 50/50. But so like, if you’re an Amazon seller, you’re doing a couple million dollars a year in sales, and most of that’s on Amazon, but maybe you have, a couple $100,000 in sales on Shopify, there may be some things we can do to clean you up. But you know, we’re not gonna go out and register in all 50 states, because your overall exposures can be measured, it can be managed. But if you’re doing $10 million on Shopify, and you’re not collecting sales tax, that’s going to be a huge issue come sell time, and your buyers, likely, they don’t want you to hold back an insane amount of money. And so we have to think about ways we can clean that up. Going into the sale, which is I’ll be honest with you, it isn’t the easiest thing to do. But it’s an important issue. And unfortunately, what the environment we’re in today, where it’s so much easier to sell the Amazon versus Shopify, I have a lot of clients that they direct their Shopify traffic back to Amazon, and so like they’ll have a Shopify site. And you can say buy it now. But that’s just a link back to Amazon.
Pat Yates 32:37
Compliance through Amazon.
Paul Rafelson 32:39
They just don’t want to deal with it. Yeah, they don’t want to deal with having, even though it can be more profitable, that that reserve amount that you have to put up for not collecting sales tax on a larger Shopify account can be substantial. And it’s a big headache for a lot of businesses right now.
Pat Yates 32:54
It’s a really good point. And for the listeners out there, I can tell you, I’ve had two or three deals in the last year that all had sales tax issues late either it was released from their state, that they were actually in compliance, or they had to go back and even one we did a carve-out of a period of time that they thought that Amazon could come back even on some fees in a one-piece situation. And you need to be prepared for those things. And make sure because you’re right, there could be a significant holdback from your sale for a year or two, while you make sure that those tax issues don’t come down. So another thing that you’re involved in, I think is kind of amazing. And I know a lot about it. So I’d love you to explain to listeners, you talk a little bit about how people are going to be given a voice and legislation and how you’re trying to get through your Online Merchants Guild tell us a little bit about Online Merchants Guild and what you’re trying to do there.
Paul Rafelson 33:42
Yeah, so our Online Merchants Guild is a nonprofit, it’s not a nonprofit charity. And so it’s 501 C six, so it’s a trade association. So think National Association of Business Brokers, or whatever that is, or you know, the word. It’s basically our attempt, it was an attempt that I made about six years ago to basically taking my experience from G, Walmart, Microsoft, especially, you know, in Walmart when I would actually go out and do lobbying. So it was part of my deal, and even a G some extent, would have to do a little bit of lobbying. But what I’m trying to do is sort of create a voice, a trade association for the e-commerce and Amazon sellers. And it’s been a tough road. But the idea is we have an organization that you can go to with questions with concerns that can take on challenges. So we’ve taken on cases so through the Online Merchants Guild, we’ve done a few things on behalf of sort of the overall e-commerce community. We were the number one voice in the antitrust investigation, Amazon so when Congress was investigating Amazon’s business practices or mistreatment of sellers we submitted resources to the antitrust subcommittee describing various scenarios on Amazon that we felt were unfair based on feedback we got from the seller community. And it turned out that our resources were the number one cited resource in the report. They relied a lot on what we had to say. And a lot of what we had to say came straight from the seller. So we were able to take the sellers voice and get it directly to Congress so they could hear in fact, we even had Congress reading some of our emails on live TV, when they were considering the legislation. We’ve challenged court cases regarding the taxes we challenged price gouging. Why would we challenge price gouging, you might ask, Am I a fan of price gouging? No, I’m not. I’m not a fan of price gouging. But the way that price gouging laws were being applied during the pandemic created a real chilling effect. And we didn’t think it was appropriate. We didn’t think that it was appropriate for a state to say that, the Amazon seller is responsible for price gouging when they can’t set a state price, right? So, you might price a hammer, let’s say there’s a hurricane in Florida, you have you’re selling a hammer, and you live in North Dakota, and you’re selling a hammer for 20 bucks. Because that’s the online market price for a hammer most of the country in Florida says, hey, we just had a hurricane. And our hammers are typically 10 bucks. So your price gouging? I mean, you see the problem there, right? That person, North Dakota doesn’t have the ability to one set of Florida price, or restrict sales to Florida, so that they’re not invading that market. Amazon doesn’t give us those tools. So he sort of challenged that concept, were able to get a freeze on price gouging enforcement via Amazon during the pandemic, especially for things like we had clients who were afraid to sell Nintendo switches. And we’re not talking about masks and PPE, we were not even going there. We’re talking about some governments were saying like you can price gouge steak seasoning. It was out of control. It just needed to get and we didn’t have the control. So we were like, all just sitting ducks. And so we take on that challenge, we take on tax challenges we went so we want a court case in Pennsylvania, that was really important about giving us a sense of what is Nexus when you’re an Amazon seller. And it was sort of the first court to say, hey, just simply using Fulfillment by Amazon is not Nexus creating, which is we think is the right answer. Because we think like a person can ship a box, it goes to Amazon, I sell a box, he goes to Amazon in Florida. By the end of the week, I can have inventory spread out across 20 states, because that’s how Amazon splits up those parcels across their network of warehouses. So we didn’t think that was appropriate. So we challenged that. We had another challenge that we lost. We didn’t lose it on technical, right. We didn’t lose it for actual merits reasons. We were trying to challenge federal court jurisdiction. We think that some of these tax court cases would be better heard in federal court, given the constitutional nature of the challenge, but we’re still getting the courts to try to agree with us. It’s a hard case. We knew but we wanted to try it. There, we’re slowly chiseling away at that. But the guild is there in there to be a voice. I think it needs more mass adoption from the community, I think we need more community leaders speaking out about it supporting it. I mean, it was never really meant to be me as the voice for it. Because actually, I wanted to be more on the back end, just doing the work, the lobbying, we actually, one other thing we did is we actually changed the sales tax law, we actually got the law change. And I was in California, quite a few times back in 2019, lobbying to get it to make it so that the sales tax collection law would fall on Amazon, not the seller so we can get out of the burden of collection across California and other states, as well. So I love the program. I think it’s important, I think sellers have the potential to be one of those powerful lobbies in the country. I mean, if you consider, I always say like everyone’s so afraid of Amazon is the big behemoth. But I’m like, if you take the number of sellers that are in the US, right, and certainly that we’re all voting, right, we’re all voters, Amazon doesn’t vote. We have quite a lot of power, if we could consolidate that power and apply it, but it’s been a rough road to get people to kind of see that. And I think that’s why big corporations win, you know, because they know that I mean, big corporations is nothing new. This isn’t a playbook that I invented. This is an old playbook. When I was at GE I remember there was a whole big to do about taxing soda cans, taxing sugary drinks in Illinois and within five minutes of announcing that as potential legislation or you had coke Pepsi, Jamba Juice, Starbucks all singing Kumbaya, and they had a coalition together funded with millions to fight that they call it camp attacks. And they did it. They got it taken care of. That’s what I’d like to see the Amazon community kind of come together and be able to do we just haven’t done that. And it’s concerning, because there’s a lot of legislation going on. In fact, the FTC has been trying to pass new antitrust legislation that would be more targeted towards Amazon sounds like they’re still going to proceed with a lawsuit against Amazon, although I don’t have a lot of hope that that’s good. And a lot of expectation, I should say that that’s going to do very much. But I think he’s just, a lot of interested parties, like, a lot of people, feign interest, but they usually have their own agenda. Like, a lot of the groups that attack, Amazon’s mistreatment of sellers are really about workers rights in the warehouse. And I’m not saying that’s not a viable mission, I’m just saying, but that’s not our mission. Our mission is about fair treatment of Amazon sellers, right. So they kind of use our stories as a way to just kind of like pile on the negative against Amazon, but their goal isn’t to make it better for us. It’s their goal is to make it better for the Amazon workers. And so who’s really out there representing our interests. And so I love the guild, I think we should do more. And I hope, if anyone has ever inspired by listening to this and wants to do more has experienced, let us know, we’re always looking for people to take on leadership.
Pat Yates 40:54
That’s amazing. So again, we’re with Paul Rafelson with Rafelson Law. So Paul, let’s wrap this up. I mean, it’s amazing to think about how not only you being actionable for people in their current Amazon situations, maybe helping them in compliance or anything they need, you’re also trying to help with legislation, which will form e-commerce the next year. So I’d encourage everyone to go to the Online Merchants Guild and check that out and maybe get involved in that community. I’m definitely going to do that as well. So is there anything else that you would want people to know that Rafelson Law does are we pretty much cover most of it?
Paul Rafelson 41:25
I mean, our goal Rafelson Law is really, our goal is to be whatever Amazon seller, whatever need, right? I mean, that’s really what we’re there for. So I mean, we’re here to be your point of contact. And even if it’s outside of our AWS, something very, very, we can help you costs, manage those types of things. Because we have networks of lawyers that we know and work with similar SellerBasics that are subject matter experts so when it’s outside of our depth, we can go and we could bring in the DA team for that type of subject matter and get you that help. So really, no, I mean, anything that your Amazon Seller, needs help but that’s what our goal is today. We’re here to be a one-stop shop for the e-commerce and Amazon sellers out there.
Pat Yates 42:13
That’s amazing. So Quiet Light, we obviously pitch people being prepared to make sure you have a mode. Make sure your legals in line if you have to work on that. Just hit up Rafelson Law. So tell them how they can get in touch with you, Paul.
Paul Rafelson 42:25
Great. Yeah. So if they want to work with some offer, my email address is really easy as [email protected]. And if you’re interested in being a part of that SellerBasics program that I mentioned that sort of it’s separate apart for the firm, but it’s a cool program for can help protect yourself is going to sellerbasics.com and sign up.
Pat Yates 42:48
That’s amazing. It’s been great having you in Paul, we I really I’m amazed at it because I had some ideas about what I thought I was going to learn. I learned a lot today with this, I think. Yeah, definitely preparation and people have no idea how steep some of these things go. So if you’re in a position where you need that kind of advice, please reach out and stay in touch with Paul and again, it was great having you on the Quiet Light Podcast. Appreciate you joining us.
Paul Rafelson 43:11
It’s awesome to be here. Thank you so much.
Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast, subject or guest, email us at [email protected]. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.