Refunds, Returns, and Warranties: What You Must Honor

Here's the myth almost every new business owner believes: that the law makes you take back merchandise if a customer changes their mind. It generally does not. If the product isn't defective and does what you said it would do, there is no general federal law requiring you to accept a return or issue a refund just because someone wants one. Your posted return policy is what governs an ordinary sale - "all sales final," "store credit only," "returns within our stated window," whatever you choose, so long as you actually post it and you actually honor it.

But that freedom has real edges, and they are where owners get hurt: a state posting law can hand your customer a refund right you never intended to give, a federal rule can force a refund when you ship late, and warranty law can keep a promise alive that you thought you had disclaimed. This guide walks through each one.

The core rule: your policy controls (if you have one)

For an ordinary, non-defective purchase - the customer just doesn't like the color, changed their mind, or found it cheaper elsewhere - there is no general federal consumer-protection law that entitles them to a refund. You are free to set your own return and refund policy: full refund, exchange only, store credit, a return window, a restocking fee, or no returns at all. That freedom is the baseline. Everything below is where that baseline gets narrowed.

Why an unposted "all sales final" can backfire

Several states and cities require retailers to conspicuously post their refund policy at the point of sale - on a sign, a receipt, or a tag - before the customer buys. The specifics differ sharply by state and even by city: what counts as "conspicuous," where it must appear, which products are covered, and how long any default refund window runs are not uniform. Do not assume your neighboring state's rule - or a rule you read about online - applies to you.

Here's the part that catches owners off guard: in places with a posting requirement, if you do not post your policy, the law typically does not let you fall back on "no refunds" as your default. Instead, it steps in and gives the customer a right to a refund within a set period simply because you failed to disclose your actual policy. In other words, silence isn't neutral - it can hand your customer a right you never intended to give them. A handwritten "ALL SALES FINAL" sign taped to a register where nobody sees it, or a policy printed only on the back of a receipt handed over after the sale, may not satisfy your state's posting requirement even if you think you complied.

What to do: Confirm whether your state or city has a posted-return-policy law, and if so, exactly what it requires - where the sign goes, how large, what it must say, which sales are exempt, and what the default is if you skip it. Your state Attorney General's consumer protection office or your city or county business licensing office is the right place to check. This is not something to guess at or copy from another business's sign.

The federal rule online sellers miss: shipping delays force a refund option

If you take orders by mail, phone, or over the internet, one federal rule does create a refund obligation - not for buyer's remorse, but for your delay. Under the FTC's Mail, Internet, or Telephone Order Merchandise Rule, you must ship within the time you clearly promised in your ad or listing, and if you promised no time at all, the default is 30 days after you receive a properly completed order. You're only allowed to make that promise if you have a reasonable basis to expect you can keep it.

If you can't ship on time, you can't simply go quiet. By the original shipping date, you have to notify the buyer, give a definite revised date if you have one, and offer them the choice to either consent to the delay or cancel for a refund - at your expense to respond. If the delay runs more than 30 days past the original date and the buyer hasn't given express consent to wait, the order is cancelled automatically and you owe the refund. When a refund is due, it has to be prompt - the rule sets a short deadline measured in working days for most payment types, and roughly a billing cycle for credit card refunds.

The practical takeaway for anyone selling online: "no refunds" in your policy does not survive your own late shipment. Build realistic ship windows into your listings, and have a cancel-or-wait notice ready to send. Confirm the current requirements and exact deadlines at ftc.gov before you write your shipping terms.

The Cooling-Off Rule: it does not cover your storefront or your website

A lot of owners have heard of a federal "three-day right to cancel" and assume it applies to any sale. It doesn't. The FTC's Cooling-Off Rule gives buyers three business days to cancel certain sales where a seller personally solicits the sale and the buyer agrees to buy somewhere other than the seller's place of business - which the rule defines as the seller's main or permanent branch office or local address. Classically that means door-to-door sales, but it also reaches sales made at the buyer's home or workplace, or at a seller's temporary location like a hotel room, a convention booth, or a fairground table. The rule sets a low minimum purchase price, and it applies at a lower amount when the sale happens at the buyer's residence than when it happens elsewhere.

The rule also carves out a specific list of transactions. Among them: sales made after prior negotiations during the buyer's visit to your fixed permanent retail location; sales conducted and completed entirely by mail or telephone with no other contact before delivery; sales of real property, insurance, or securities and commodities sold by an SEC-registered broker-dealer; and narrow buyer-initiated situations - a bona fide immediate personal emergency where the buyer hand-writes and signs a statement waiving the right to cancel, and visits the buyer asks for to repair or maintain property they already own (though anything sold beyond replacement parts on that visit can fall back inside the rule). Note how narrow those buyer-initiated carve-outs are: the fact that a customer called you first does not, by itself, put a sale outside the rule. Separately, the rule expressly exempts arts or crafts sold at fairs or similar places, and motor vehicles sold at auctions or tent sales by dealers who have a permanent place of business.

Crucially, the Cooling-Off Rule does not reach an ordinary transaction at your store, or a purchase a customer makes on your website or app - there's no in-person solicitation away from your permanent location in either case. Where it can matter is if you sell at pop-up events, in-home consultations or demonstrations, or trade-show booths that aren't your normal selling location and aren't the exempt arts-and-crafts kind. If any part of your business works that way, read the FTC's own explanation of who is covered, the current dollar thresholds, and the cancellation notice you must hand the buyer at ftc.gov before you rely on any summary of it, including this one.

Your own advertised policy is a promise the FTC and your state can enforce

Even where nothing forces you to offer returns at all, once you advertise a policy - "30-day returns," "money-back guarantee," "no questions asked" - refusing to honor it is a different problem entirely. Advertising a return or refund policy and then not following it is a deceptive practice under the FTC Act, and states have their own unfair-and-deceptive-acts-and-practices (UDAP) laws that a customer or a state attorney general can use the same way. The fix is simple and entirely within your control: post only the policy you're actually willing to follow, train your staff on it, and apply it consistently. Consistency also protects you from discrimination complaints - a policy enforced against some customers and quietly waived for others invites exactly that kind of scrutiny.

Warranties: what you're promising about the product itself

Returns are about a buyer's change of mind. Warranties are about whether the product actually works as promised. These are legally distinct, and owners often blur them.

Express warranties are whatever you actually promise - in writing, in an ad, or even verbally at the point of sale ("this will last five years," "waterproof to 30 feet"). If you say it and a reasonable buyer relies on it, you may have created an express warranty whether or not you meant to.

Implied warranties exist even if you say nothing at all. Under Article 2 of the Uniform Commercial Code - which governs sales of goods, not services, and which has been adopted in some form in nearly every state (Louisiana is the notable holdout on the sales article and handles defective goods through its own civil-law rules instead) - a merchant who regularly deals in goods of that kind automatically gives an implied warranty of merchantability: broadly, a promise that the goods are fit for their ordinary purpose. A separate implied warranty of fitness for a particular purpose can arise when you know the customer is relying on your judgment to pick something for a specific use. Your state's version controls the details, and a few states restrict "as is" selling more than others, so check your own state's law rather than a generic summary.

You can often disclaim implied warranties using clear, conspicuous "as is" or "with all faults" language where your state's UCC allows it - but there's a major federal catch.

The Magnuson-Moss Warranty Act catch: this federal law says that if you give the buyer a written warranty on a consumer product - or enter into a service contract with them within 90 days of the sale - you may not disclaim the implied warranty of merchantability at all. You can limit how long the implied warranty lasts, but only to the duration of your written warranty, and only if that limitation is conscionable, set out in clear and unmistakable language, and prominently displayed on the face of the warranty. You cannot wipe it out. The Act also requires that if you offer a written warranty on a consumer product, its full terms be made available for the customer to read before they buy - not handed over in the bag afterward. And you generally can't condition warranty coverage on the customer using your brand of parts or service.

Practically: decide up front whether you're offering a written warranty at all. If you are, plan on the implied warranty riding along with it. If you genuinely want to sell "as is," don't pair that with written warranty language that undercuts it. This is an easy area to get backwards - read the FTC's business guidance on warranty law at ftc.gov, or ask a lawyer, before you print warranty cards or website warranty terms.

The leverage your policy can't override: chargebacks

Whatever your posted policy says, a customer who paid by credit card has one more option: disputing the charge with their card issuer. A chargeback isn't governed by your return policy at all - it runs on the card network's own rules and, for certain billing-error and disputed-purchase situations, on federal consumer credit law. A customer can win a chargeback even when your policy said "no refunds," particularly if the goods were defective, not as described, or never delivered. A fair, clearly posted, consistently applied policy - plus dated records of what you disclosed and when - is your best protection against losing chargebacks you don't deserve to lose.

What to do

• Write a plain return/refund policy and decide deliberately: full refund, exchange, store credit, restocking fee, or none.
• Check whether your state or city requires you to post that policy conspicuously, and exactly how - don't guess, and don't borrow another state's rule.
• If you sell by mail, phone, or online, set ship windows you can actually hit, and know that a late shipment triggers a federal duty to offer the buyer a cancel-and-refund choice.
• Never advertise a policy you aren't prepared to honor consistently for every customer.
• If you sell away from your permanent location (home visits, pop-ups, non-craft fair booths), review the FTC's Cooling-Off Rule requirements before you take a sale that way.
• Before you print any written warranty on a consumer product, understand that it keeps the implied warranty of merchantability alive under the Magnuson-Moss Act, and make the full terms available before the sale.
• Keep dated records of your posted policy, ship promises, and warranty terms - they're your best evidence in a chargeback dispute or a complaint.

Frequently asked questions

Do I have to accept returns if the item isn't defective?

Generally no - there is no broad federal law requiring it. Your posted policy controls, subject to any state or local posting requirement and to whatever you've actually advertised.

What happens if I never post a return policy at all?

In states or cities with a posting requirement, not posting a policy can trigger a default right to a refund within a set window rather than protecting you with an implied "no returns." The requirement and the default window vary - check your state's rule rather than assuming silence is safe.

Does the three-day cooling-off rule apply to my online store?

No. The FTC's Cooling-Off Rule applies to certain in-person sales solicited away from your permanent place of business, like door-to-door or temporary-location sales. Ordinary storefront and online purchases aren't covered - confirm the specifics at ftc.gov if you sell at pop-ups, fairs, or in customers' homes.

I'm running behind on an online order. Can I just tell the customer to wait?

Not unilaterally. Under the FTC's Mail, Internet, or Telephone Order Merchandise Rule you have to notify the buyer by the original ship date and give them the option to cancel for a refund instead of waiting, and a long enough delay without their express consent cancels the order automatically. Check the current deadlines at ftc.gov.

Can I just sell everything "as is" and avoid all warranty obligations?

Sometimes - you may be able to disclaim implied warranties with clear "as is" language where your state's law allows it, but only if you're not also giving a written warranty on a consumer product. Under the Magnuson-Moss Warranty Act, a written warranty (or a service contract entered into within 90 days of the sale) and a total disclaimer of implied warranties can't coexist.

A customer disputed the charge on their card even though my policy said no refunds. Can they do that?

Yes. Chargebacks run on the card network's rules, not your store policy, and a customer can often win one regardless of what your policy says, especially for defective, misdescribed, or undelivered goods.

This article is general information, not legal, tax, or financial advice, and reading it does not create an attorney-client relationship. Rules in this area change and vary by state and city - confirm current federal requirements at ftc.gov and check your own state's rules with your state Attorney General's consumer protection office. Free help with business questions is available through the SBA, SCORE, and your state's Small Business Development Center.