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EcommerceBytes-NewsFlash, Number 962 - February 25, 2005 - ISSN 1539-5065    2 of 3

eBay Sellers: Do you need a license to sell online?

By Kathy Greer
EcommerceBytes.com
February 25, 2005




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Selling online at auctions and reside in the state of Tennessee? You need an auctioneer's license and special escrow account. At least, that's what the Tennessee Attorney General's office is saying. And that's not the only state that's cracking down on existing state laws and applying them to the Internet.

According to Rhessa Orr, Executive Director of the Nashville, TN Auction School, "In 2004, the Tennessee Auctioneers Commission (the licensing agency for the State of Tennessee) determined that persons and/or companies that were selling on electronic auctions for someone else and by doing so were consigning the merchandise in for sale, collecting and dispersing the funds did fall solidly under the Tennessee Code Annotated for a "Gallery License" designation."

In effect, such sellers (as in drop-off centers and eBay Trading Assistants, etc.) are required to obtain a Tennessee Gallery license. The TN Gallery license requires a mandatory 30-hour Qualifying Education program, successful completion of a state issued examination, and proof of an escrow/trust account.

According to several Tennessee business owners with whom we spoke, citation letters were sent out to hundreds of "non-compliance" businesses. The eBay Trading Assistant program provides the names and addresses of many Tennessee online sellers since you can search the eBay site for Trading Assistants by zip code (http://contact.ebay.com/ws/eBayISAPI.dll?TradingAssistant&page=main).

Orr said, "Since September of 2004 we have had several students attend - either because the state contacted them and notified them of this requirement or because they heard about the requirement and voluntarily have complied."

And while the Tennessee school may be the first in the nation offering compliance classes for online auctions, others are lining up.

Larry P. Troutman, CEO of the Atlanta Auction Company, and Chairman of the Board for the Atlanta, Georgia Academy of Auctioneers, said while they are not offering such courses at this time, "I will in the very near future. The state of Georgia doesn't require it currently." He added, "I will be touching on the issue during my next 12 continuing education classes this year…"

So how does this affect online sellers? Well, if you are in Tennessee, the state has added some stringent new requirements for online sellers.

Rhessa Orr pointed out, "because the trust/escrow accounting requirements create some additional issues that electronic auction sellers need to be aware of, Nashville Auction School has developed a curriculum specific to electronic auction sellers to address some of these unique issues. At present, this course is not approved for the 30-hour requirement and is totally voluntary. We held our first session in January 2005 and have another scheduled in April 2005."

Illinois, on the other hand, appears to be approaching licensing online auction sellers in a completely different respect and covering all the bases.

The Illinois Department of Financial and Professional Regulation, Division of Banks and Real Estate (DBRE) filed their final rules needed to Register Internet Auction Listing Services (IALS) in 2004. These rules implement provisions of the Auction License Act (225 ILCS 407/10-27) and went into effect on September 16, 2004. Section 10-27 of the Auction License Act requires an IALS to register with the DBRE if any of the following conditions exist:

(1) the person, corporation, limited liability company, partnership, or other entity providing the Internet auction listing service is located in the State of Illinois;

(2) the prospective seller or seller, prospective lessor or lessor, or prospective purchaser or purchaser is located in the State of Illinois and is required to agree to terms with the person, corporation, limited liability company, partnership, or other entity providing the Internet auction listing service, no matter where that person, corporation, limited liability company, partnership, or other entity is located; or

(3) the personal property or services offered for sale or lease are located or will be provided in the State of Illinois.

The fee for the initial registration is $200 and expires September 30, 2005. The renewal fee for an IALS shall be $450 for a two-year renewal period.

Of course, it is provision (2) that has many online sellers scratching heads. It would appear that if a prospective purchaser is located in the State of Illinois, regardless of where "you" are located, you need an IALS in IL to sell to an IL resident. However, there are no schooling requirements.

And if you're an online seller in Ohio, you may be in for a rude awakening. According to Ohio auctioneer Max K. Walton, CAI/AARE and President of the Walton School of Auctioneering, "Our Ohio Legislature just passed into law Senate Bill 209 which has become a part of Ohio Revised Code of Laws, which does address internet selling at auction. I checked with the Ohio Dept. of Agriculture who administers our auctioneer law. Ohio is going to enforce E-bay sellers and require an auction firm license. It is my understanding that it will be covered in the following manner. The principal of the Seller will have to Post a $50,000.00 Bond pass a written exam.., and have a currently licensed auctioneer conduct the actual auctions including contracts, funds dispersal, etc. There are presently no requirements for the internet seller to attend auction school unless they want all the other benefits that come from the license."

According to Donna Brinker of the Ohio Department of Agriculture, the fee for the license will be $100 a year and the only exemption is for people selling their "own items"…BUT that does not include people who "purchase items for resale"… for example, a dealer who attends live auctions, buys merchandise and then brings it home or to their shop where they sell it online. Ohio law, she said, would in that case require an auction firm license. She added the original intent (and "intent" she pointed out can be interpreted differently by different courts) was to see that those people who are handling "public monies" and providing auction services, such as drop-off online auction centers, be licensed as auctioneers.

The letters of instruction being sent out by the State of Tennessee to existing drop-off centers giving them an opportunity to comply without penalty has had a positive response, according to Rhessa Orr.

"It does appear that most business do want to operate in full compliance with the laws of the state and are eager to get into compliance once they are notified of the law," she said.

Debbie Gordon, President/CEO of eBay drop-off store Snappy Auctions, said she was more than happy to comply. "I didn't want to have any problems," she said. A former technology consultant, Debbie got bitten by the eBay bug when she started selling designer shoes on eBay after the dot.com bust and 9-11. She attended auction school for 5 days and found the legal end of the course instructive. She said the Tennessee law regarding escrow accounts was not restrictive and protected consignors.

"We have it go directly through Paypal," she said. "From there it flows directly into our escrow account and then to the consignors."

According to Dennis Hodges of the Tennessee Auctioneer Commission, yearly fees for obtaining a Gallery License (not including schooling) is $100, plus if you have satellite drop-off centers, each of those are required to have a Branch Office Gallery License at $50 a pop. In addition, there is a yearly $50 "recovery" fee.

According to Sherry Rogers of NuMarkets.com, another of Tennessee's large drop-off businesses, "NuMarkets headquarters and each of our franchise locations is licensed by the State of Tennessee Auctioneer Commission. We believe this is important to regulate and monitor the industry. We have requested that the type of training given be updated to include Internet auctions and have offered our training facility for the instruction."

As for individual Tennessee dealer response, one man who wished to remain anonymous said, "It is not needed if you are selling at fixed price, which is mainly what I have been doing lately (ie, thru eBay stores)."

The website for Nashville Auction School is http://www.learntoauction.com

You can contact Debbie Gordon directly from http://www.snappyauctions.com

You can learn more about NuMarkets at http://www.numarkets.com

The Tennessee Auctioneer Commission's website (from which you can download licensing requirements and applications) is http://www.state.tn.us/commerce/boards/auction

The Illinois Dept. of Banks and Real Estate (which regulates IL auctioneers) has posted their online licensing regulations plus application, etc. at http://www.obre.state.il.us/REALEST/NEWS/IALSReg.htm

The Ohio Department of Agriculture Auctioneer Program (along with SB 209 signed into law on 2/1/05) can be viewed online at http://www.ohioagriculture.gov/auction

You can contact Donna Brinker at the Ohio Dept. of Agriculture 800-282-1955

Kathy Greer, a former investigative reporter, for the past fifteen years has been the Senior Editor of "UnRavel the Gavel" (http://www.thegavel.net), a newspaper covering the New England auction scene.

About the author:

Kathy Greer, a former investigative reporter, for the past fifteen years has been the Senior Editor of "UnRavel the Gavel" (www.thegavel.net), a newspaper covering the New England auction scene.

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