EcommerceBytes-Update, Number 140 - April 03, 2005 - ISSN 1528-6703     3 of 7

eBay Drop-off Stores: How to Comply with State Regulations

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The arrest of Web Auction Yard storeowner in Tallahassee, Florida last month highlights the scrutiny eBay drop-off stores are facing at the state and local level. The storeowner was charged with failing to comply with state statutes governing consignment stores and pawnshops. The judge dismissed the case, but the Florida Law Enforcement Property Recovery Unit is proposing an update of Chapter 538 (http://www.flepru.org/legislative.html).

Auctioneers and pawnbrokers who follow strict regulations in some states may be helping to draw attention to the issue. How does a drop-off store determine what laws and regulations may apply to them? After speaking to several experts and storeowners, it seems there's no single answer.

Paul Edwards, who with his wife Sarah are the preeminent experts in small business issues (http://www.workingfromhome.com), said, "The best call to make is to an attorney versed in business law. While a legal opinion will cost money, if one is pursuing selling on auction sites on a steady basis, it's a worthwhile investment." He said sellers could prepare in advance by looking for the applicable state law on their state's website.

Debbie Gordon, President and CEO of eBay drop-off chain Snappy Auctions (http://www.snappyauctions.com), suggests starting with the Secretary of State. "As a franchisor, we want to help our franchisee be in compliance at all times, so we are constantly staying abreast of the ever-changing regulations," Gordon said. "The government organizations are all different in each state, and they all have overlapping functions, for example in Tennessee it is the department of commerce and insurance."

Snappy Auctions operates stores in 12 states. Gordon got her auctioneer's license last year because of Tennessee State regulations. Every time a buyer buys something from any of Snappy Auctions' eBay auctions, the money is put into an escrow account and is paid out to consignors from headquarters in Tennessee.

Andy Balbus, owner of eBay drop-off store Sellers' Market (http://www.sellers-market.com), said, "In Connecticut, it is fairly easy to check state laws and regulations through an Internet search. It is also a good idea for drop-off stores to join or learn from state associations of consignment stores. Having a good attorney on call doesn't hurt either." Balbus opened his drop-off store in late 2002.

eBay spokesperson Chris Donlay said, "The challenge is that many of these regulations are local or at a state level. So there's no one answer that will fit everyone's situation. People can do research on existing statutes online - www.findlaw.com for example, is one place to check - but they should probably also check with their lawyers or local licensing agencies."

FirstGov links to state government websites at http://www.firstgov.gov/Agencies/State_and_Territories.shtml.

Since AuctionBytes' recent Newsflash articles about state regulation of drop-off stores, the issue has been heating up even more. eBay created a section on its site devoted to Auctioneering Regulation (http://digbig.com/4dbpk). The site proclaims, "eBay opposes attempts to extend state auction licensing requirements to either eBay sellers or eBay itself."

A section of the website, "how to find and write your state representative," contains links to state legislatures along with a sample letter. eBay is creating a new program, Main Street Meetings, so sellers can learn how to get involved in the regulation debate. More information will be available about the program in a month or so, according to Donlay.

At a Town Hall Meeting held online on March 31, 2005, eBay's Michelle Peacock said that in addition to eBay's internal government relations staff, which has been greatly ramped up, they have an army of consultants. eBay is currently working with an Ohio legislator on an amendment to the state's new law (http://www.auctionbytes.com/cab/abn/y05/m02/i25/s02), which according to Peacock, "was never intended to cover eBay sellers."

eBay executives told listeners of the Town Hall Meeting to be active when issues come up, advising, "We're all voters."


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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